African markets

Kenya: Treasury to issue new Eurobond next week

Kenya plans to launch two new Eurobonds over the next six months to fund the budget and repay part of the first sovereign bond borrowed in 2014.

The Treasury told the International Monetary Fund (IMF) that it plans to launch an issue before the end of this month as part of the external component of budget financing for the current fiscal year, and another by June. 2022 for the refinancing of the 10-year, $ 2 billion (226 billion shillings) bond sold in 2014.

The IMF says Kenya will borrow $ 2.19 billion (247 billion shillings) from the two commercial loans.

The IMF made the revelation in its review of government accounts that led to the release of the additional 29 billion shillings under the 38-month program.

“Our plans for the future include: by the end of December 2021, subject to favorable market conditions, the authorities will issue a Eurobond to finance the 2021/2022 budget. This financing was previously scheduled for early 2022, ”says the IMF.

“By the end of June 2022, subject to favorable market conditions, issue a Eurobond to redeem all or part of the bond due 2024 as part of a debt management transaction.

Kenya hopes to speed up the Eurobond program to gain a favorable appetite, especially ahead of the next parliamentary elections, which carry political risks that could affect attractiveness.

He is betting on similar success to the billion dollar bond issued in June this year, which has found the international debt market receptive to both demand and low rates.

The IMF also revealed that Kenya will remove the debt ceiling of 9 trillion shillings set two years ago, as the country’s current debt stock of 7.7 trillion shillings is on the verge of exceeding. the goal.

The Treasury submitted to the Attorney General and to Parliament a proposal to modify the public finance management law relating to the debt ceiling in November 2021.

The new debt anchor will be set at 55% of gross domestic product (GDP), with debt measured in terms of present value and an accountability requirement that requires transparent communication to parliament and the public on plans and progress towards achieving debt anchoring within a specific time frame. Time range.

Kenya has changed debt sustainability models over the past 10 years from a ceiling in 2014 to a percentage of the economy in 2015.

In 2019, Kenya returned to a debt ceiling it now wants to revoke and revert to GDP measures on IMF reform requirements.