Statistical information published by Kenya may differ from that produced by other sources and may be unreliable, this is according to the prospectus of Kenya’s recent Eurobond sale arranged by Citibank, Standard Chartered, JP Morgan & Standard Bank.
The prospectus lists this as one of the many risks relating to the republic when it comes to pricing of the issue and may materially affect the country’s economy and its ability to repay the bondholders.
Statistical information may also be more limited in scope and published less frequently than in the case of other countries such that adequate monitoring of key fiscal and economic indicators may be difficult. The National Treasury, Kenya National Bureau of Statistics and the CBK all produce, and prior to August 2010 the Ministry of Finance produced, statistics relating to Kenya and its economy.
“Although collaborative efforts are being taken by the relevant agencies in order to produce accurate and consistent social and economic data, there may be inconsistencies in the compilation of data and methodologies used by some of these agencies…..,given the relative size of the informal economy in Kenya there may be material omissions or misstatements in the statistical data prepared by such agencies.” Reads part of the prospectus.
As a result, there can be no assurance that these statistics are as accurate or as reliable as those published by more developed countries. In addition, Kenya’s statistical information may also be more limited in scope and published less frequently than in the case of other countries such that adequate monitoring of key fiscal and economic indicators may be difficult.
“Prospective investors should be aware that figures relating to Kenya’s GDP, its balance of payments and other figures cited in this Prospectus may be subject to some degree of uncertainty and that the information set forth in this Prospectus may become outdated relatively quickly, which may result in such figures being revised in future periods.” Continues the document.
China Risk
The document also warns investors that with China being Kenya’s largest creditor, an adverse impact on the Chinese economy may impact the future ability of Kenya to increase its borrowings.
As at 30 June 2017, outstanding bilateral external debt due to China (excluding Chinese commercial banks) amounted to US$4.6 billion, making China Kenya’s largest creditor.
In 2017, various ministries and corporations in Kenya, such as the Ministry of Energy and Kenya Power and Lighting Co. Ltd. entered into a series of loans with Exim Bank of China, amounting to a total sum of approximately US$1.2 billion and CNY3.4 billion. Such loans mature between 2030 and 2040 and were used to fund certain infrastructure and electricity projects in Kenya.
“Kenya’s reliance on China for such a significant portion of its bilateral external debt and a key financing source to various infrastructure projects means that any disruption to China’s economic stability could have an adverse effect on Kenya’s ability to increase bilateral borrowings from the country in the future.”
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