Kenya raised US$ 1 Billion in its Eurobond sale in two years, an oversubscription in what the National Treasury described as a sign of enormous confidence in Kenya’s economy and prospects.
According to a statement by Treasury Cabinet Secretary Ukur Yatani, the 12-year bonds that were priced to yield 6.3% received more than US$ 5.4 Billion in orders after a successful roadshow that lasted for three days.
Kenya is caught between a rock and hard place
The East African nation is caught in a delicate balancing act between financing its economic recovery from the COVID-19 pandemic while also cutting down its vast public debt load.
The economy is expected to record a growth of 6.6% in 2021 from 0.6% last year as it shakes off the adverse effects of the pandemic.
Authorities are relying on improved revenue collection to cut the fiscal deficit to 7.5% of GDP beginning in the new financial year from 8.7% in the 2020/21 financial year.
Investors have been bullish since the country reached a deal with the International Monetary Fund, with analysts saying the agreement has given confidence to bondholders.
Citigroup Inc. and JPMorgan Chase & Co. were the lead bookmakers, assisted by NCBA Group and I&M Bank Kenya. Kenya faces a huge budget deficit in 2021/22, which it plans to fill with external and domestic debt.
According to the parliamentary budget office, public debt-service costs will probably surge to a record KSh 1.17 trillion ($10.8 billion) in the year, equivalent to about two-thirds of national revenue.
Kenya plans to seek an estimated US$7.3 billion in the Eurobond market over the next two years, says the IMF.
However, the government is taking a cautious approach to commercial borrowing to ensure debt sustainability, according to the Debt Management Office’s head, Haron Sirima.
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