Kenya is in a quest for a KSh123.5 billion Eurobond, marking a shift back to foreign debt. The East African nation intends to raise KSh123.8 billion ($1.13 billion) in sovereign bonds in the next four months and an additional KSh124.3 billion during the fiscal year starting in July.
This comes after a more than 5,000% increase in the share of planned commercial financing to June 2021, as disclosed in the final Budget Policy Statement (BPS).
This will be Kenya’s fourth Eurobond in six years and the first under CS Ukur Yatani’s administration, which previously sought to stay off external commercial financing, opting for concessional and semi concessional funding.
Kenya made its inaugural entry into the Eurobond market in June 2014, raising KSh219 billion on the debut issue. The country then snapped up KSh82.1 billion from a tap sale in the same year. It then added two more Eurobond issues in 2018 and 2019, totalling KSh449 billion.
Kenya’s return to the Eurobond market is against its participation in the Debt Service Suspension Initiative (DSSI), whose terms included a break from external commercial financing. However, the DSSI initiative allows exemption from which countries like the Ivory Coast have returned to the international capital markets even after joining the program.
The National Treasury has now set the limit on external commercial financing at KSh350.5 billion in the year ending in June, from a low KSh6.2 billion.
According to the government data, Kenya’s public debt stood at KSh7.28 trillion by the end of December 2020, equivalent to 65.6% of the gross domestic product in nominal terms. The Treasury wants the statutory debt ceiling lifted to above 9 trillion shillings to accommodate anticipated fiscal deficits from 2021-22.