Kenya likely to skip Ksh.124 billion Eurobond on renewed global market volatility
Kenya could go without the scheduled Ksh.124 billion Eurobond issue for the financial year ending June 2022.
The National Treasury intends to fill the gap through domestic credit as it mulls raising domestic borrowing by two folds.
“Over the years, the government has successfully met its financing targets and the domestic market remains resilient and vibrant and the National Treasury is confident that with ongoing reforms aimed at increasing market efficiency, the market will continue meeting the government financing need,” said Treasury.
Besides the Ksh.124 billion Eurobond, Treasury has planned two further Eurobonds including Ksh.105.6 billion in the fiscal year commencing July 1 and Ksh.270 billion in the 2023/2024 fiscal year.
The balance from domestic borrowing is meanwhile scheduled to be settled by proceeds from concessional lending including loans from the World Bank and the International Monetary Fund (IMF).
According to Citizen Digital, the National Treasury is wary of rising interest rates in international capital markets from renewed global volatility and the normalization of monetary policy in advanced economies.
“The international capital market conditions are unfavourable with elevated yields on traded securities and there is a likelihood of not issuing Eurobond in the current fiscal year,” the National Treasury stated.
“It is noted that there is a risk of elevated yields in the international capital markets which is likely to adversely affect Eurobond funding costs and may necessitate deferment of the planned liability management operations.”
Central Bank of Kenya (CBK) data shows yields on Kenyan Eurobonds have been on the rise so far this year with the 2019 7-year issue for instance recording a 3.6 percent jump in yields while the debut 2014 10-year issue has posted a 3.2 percent rise in interest rates.
According to Bloomberg, countries in Africa are grappling with the high external financing costs with Ghana and Ethiopia for instance seeing their borrowing cost rise by more than seven percent since 2019.
The pair of countries seem to be in the immediate danger of defaulting on their external debts.
Kenya is not seen to be far behind the pair as its debt servicing costs hit a new record in the next fiscal year.
Kenya’s latest Eurobond came in June 2021 when it took Ksh.115.7 billion ($1 billion) from the sovereign bond market.