Kenya plans to borrow an additional Sh1.3trillion inclusive of at least two Eurobonds from the international financial markets in the next 18 months according to the International Monetary Fund (IMF).
Inside National Treasury’s borrowing plan as submitted to IMF, a total of Sh528billion of government external borrowing will be concessional compared to Sh253 billion in commercial borrowing (Eurobond issuance) for project financing.
Consequently, the Eurobonds alone will net the country a total of Sh781billion.
IMF has noted that the borrowing plan under the program allows for another Sh550 billion Eurobond issuance to be used exclusively for debt management operations.
By the close of last year, multilateral creditors accounted for around 40 percent of external debt in Kenya, while debt from bilateral creditors represented close to 33 percent.
Of Kenya’s bilateral debt, about 63 percent is owed to non-Paris Club members, mainly loans from China to finance construction of the Standard Gauge Railway (SGR) project.
In March, treasury said that Kenya would use proceeds from a fresh Eurobond to retire expensive loans and refinance the old Eurobonds, if it fails to secure cheaper concessional loans.
The reason why the government is contemplating accessing the international financial markets is in the event it does not get cheaper credit elsewhere according to Dr Haron Sirima, the Director-General and Public Debt Management Office at the National Treasury.
Treasury Cabinet Secretary Ukur Yatani said that Kenya has no challenges with Eurobond repayments because it is going to be rolled over. He said the government has also made provisions for servicing and also replacing. Kenya went for its first Eurobond in June 2014 where a total of Sh280 billion was borrowed in five and 10-year tranches.
The government went back for another Eurobond in 2018 where it netted Sh202 billion in 10 and 30-year tranches. In 2019, Kenya was once again back at the international markets where it raised its Sh210 billion in its third Eurobond named the ‘Kachumbari’ bond that also repaid other loans and funded unspecified projects.
By the end of December 2020, Kenya’s debt had grown to Sh7.2 trillion, an equivalent to 65.6 percent of the Gross Domestic Product (GDP).