Kenya has beaten a hasty retreat from its early plans to float a KSh115 Billion ($1 billion) Eurobond and has instead shifted its attention to borrowing from a consortium of commercial banks after the National Treasury and Planning Ministry received bids prices at 12%.
According to Kenya Treasury Cabinet Secretary Ukur Yatani, Eurobonds had become expensive due to the ongoing conflict between Russia and Ukraine.
Kenya now joins the club, including Nigeria, which has frozen plans to float a $950 million Eurobond due to the hostile market conditions occasioned by the Russia-Ukraine conflict.
While the East African largest economy had planned to finance part of the 2022/23 budget by borrowing through the Eurobonds, the cost of taking this route has proved high.
CS Yatani said that while the country borrowed at 6% in 2021, the rates have since doubled, making this option unfeasible. This is why Kenya, he told a local daily, is seeking cheaper bank syndicated loans.
The Central Bank of Kenya(CBK) Weekly statistical bulletin indicates that Kenya appears to have lesser headroom for heavy borrowing as its public debts rise significantly.
Kenya Public Debt as at March 2022
According to CBK figures, the country’s public debt hit KSh 8.4 Trillion at the end of March 2022, a significant rise in three months from KSh 8.2 Trillion at the end of December 2021. Out of the total public debt load, the domestic level rose from KSh 4 trillion in December 2021 to KSh 4.2 trillion in March 2022.
As of 27th May 2022, Banking institutions were the largest holders of government domestic debt instruments at 48.50%, followed by Pension Funds (32.25%), Insurance (7.07%), Parastatals (5.81%) and Others (6.37%).
CBK has raised concerns about inflation in the advanced economies, as Eurozone inflation increased to 8.1 per cent in May from 7.5 per cent in April, and the Bank of Canada lifted its benchmark interest rate to 1.5 per cent.
International oil prices rose during the week ending June 2, with Murban oil prices increasing to US$ 111.71 per barrel, comparable to US$ 111.19 per barrel on May 26, 2022.