The Central Bank of Kenya(CBK) has floated a KSh 25.6 Billion Infrastructure Bond, to assist the Government finance various infrastructure projects.
Sale of this six-year infrastructure bond begun on 14th May 2020 and will end on 26th May 2020. The bond will pay an interest of 10.2% per annum.
The minimum amount to invest is KSh 100,000.00 with interest payable every six months starting from 30th November 2020. The bond will be redeemed on 25th May 2026.
The Bond will be tax-free as is the case for infrastructure Bonds as provided for under the Income Tax Act.
According to the prospectus, duly completed bond application forms must be submitted to any branch of the Central Bank of Kenya by Tuesday, 26th May, 2020.
The auction date is Wednesday, 27th May, 2020 with successful bidders being informed the following day.
Only investors with holdings in the one-year TBill issue are eligible to bid for this bond. The plan by CBK to switch the Treasury Bill investors to the longer-term 6-year bond indicates pressure on the exchequer to meet its short term debt obligations.
National Treasury is presently faced with huge public debt servicing obligations against declining revenue collections. The business and trade disruptions caused by COVID-19 have contributed to the drop in tax revenues.
President Kenyatta’s administration has a long list of infrastructure projects that it had planned to execute during the 2019/2020 financial year.
They include the KSh 55.8 Billion Naivasha – Nairobi Standard Gauge Railway, the affordable housing plan, and the KSh55.8 billion Lamu Port, South Sudan, Ethiopia(LAPSSET) transport corridor, considered Eastern Africa’s largest and most ambitious infrastructure project.