Kenya is in a race to take up nearly Ksh.792.33 billion in Eurobonds over the next 18 months.
According to a new report by the International Monetary Fund (IMF) on Kenya entailing new borrowings between April 1 to June 30, 2022, Kenya is set to issue an initial Ksh.249.8 billion ($2.3 billion) Eurobond for project financing.
Kenya will also issue Ksh.543 ($5 billion) Eurobond for the purpose of debt management operations which include the financing of the 2024 Eurobond and retiring of relatively expensive syndicated loans.
“The borrowing plan under the program allows for another $5 billion Eurobond issuance to be used exclusively for debt management operations, which could include a refinancing of the 2024 Eurobond and retiring of relatively expensive syndicated loans,” reads the report.
Kenya already applied and received an exemption from the IMF to tap debt from Eurobond issues even as it enjoys concessional financing from both the multilateral lender credit lines and the World Bank Development Policy Operations (DPO).
“While Kenya is at high risk of debt distress and subject to zero limits on non-concessional borrowing, the authorities have requested, and staff supports, non-zero limit exceptions for project financing and debt management operations,” stated the IMF.
Over the same period running to December 2022, Kenya will be tapping Ksh.521.2 billion ($4.8 billion) in concessional borrowing, externally.
IMF says the domestic market is set to remain an integral part of public financing.
The National Treasury is seeking to leverage the new borrowing schedule to extend the time to maturity on debt as a means to cushion Kenya’s rising debt distress.
“On debt management issues, the authorities emphasized their efforts to extend the maturity of domestic debt and need to pursue a financing strategy that balances domestic and external financing, utilizes concessional financing where available, and accesses private capital markets judiciously,” added the IMF report.
This will be the fifth time Kenya will be going for the infamours Eurobond at the international market within a period of six years.
The first Eurobond was in June when Kenya raised Ksh.219 billion before immersing a further Ksh.82.1 billion. The Treasury later issued two pairs of Eurobonds in 2018 and 2019 and raised a total of Ksh.449 billion.
The expected Eurobond issues, according to the IMF are expected to retire in 2024.
Kenya’s appetite for borrowing
Kenya has already secured a loan package of nearly Ksh.256 billion from the IMF, which has raised many hues and cry over Kenya’s growing level of indebtedness.
The loan was approved by the IMF on March 2 and will see the National Treasury receive Ksh.33.7 billion immediately with another Ksh.44.2 billion set to be released by the end of June 2021.
According to Treasury Cabinet Secretary, Ukur Yatani, the balance of the loan will be disbursed every six months over a 38-month period, subject to reviews by the multilateral lender.
Kenya’s focus now remains centred on broadening the tax net and reducing remaining
tax exemptions including in Value Added Tax (VAT).
“Past IMF technical assistance has identified a range of tax measures that the authorities could consider to significantly improve collection going forward. Durable progress in revenue mobilization also rests on continuous efforts to strengthen revenue administration in line with past Fund advice,” said IMF.
To manage the debt, the IMF has advised Kenya to restrain recurrent expenditure, particularly through a gradual reduction in the wage bill and transfers to public sector entities.
IMF has asked Kenya to consider improving the efficiency and effectiveness of government spending consistent with recommendations in the recent Public Expenditure Review undertaken by the World Bank.
