Kenya Presidency (Nairobi)

25 June 2014

Kenya Successfully Concluded Sale of U.S. $2 Billion Eurobond, President Announces

Nairobi — Kenya has successfully completed the sale of the largest sovereign bond in Africa, fetching $2 billion (Ksh 175 billion) on the international market.

The bond was oversubscribed by 500 per cent but the Government chose not to take more than what was required.

President Uhuru Kenyatta made the announcement today at State House, Nairobi, where he said that the good returns from the bond were an indication that the world has confidence in the Kenyan economy.

More than 65 per cent of the bonds were bought by US investors while the second in rank were UK investors at between 15 to 16 per cent.

The bonds are already trading at the Irish Stock exchange at 102 per cent which shows more confidence by investors in the Kenyan economy.

President Kenyatta assured Kenyans that the proceeds from the bond which have already been deposited in Kenya's accounts will be used prudently.

"Proceeds of the bond transactions will be used for funding of infrastructure in energy, transport and agriculture," he said at a live press conference.

The Eurobond will also reduce local borrowing by Government which will in turn reduce interest rates, said the Head of State.

The President also used the occasion to brief Kenyans on the country's resilient economy.

"Growth remains satisfactory and the outlook is bright. Macroeconomic indicators like inflation, interest rates and the exchange rate remain largely stable," he said.

The President also explained how international partners have lined up support for Kenya's development agenda.

"We received support from China for various projects, including the Standard Gauge Railway and more recently, our European Union and World Bank partners renewed their support for Kenya with a total financial support amounting to about Ksh 500 billion," he said.

President Kenyatta said the sale of the sovereign bond, the largest in Africa, represents an important milestone for our country.

"It is an important stepping stone in the path to emerging market status as the Government implements its transformative agenda under my leadership," he said.

The President said the transaction has diversified the country's funding sources and established an important benchmark for both private and public sectors.

"Both private and public sector corporations now have the ability to tap into the international capital market to fund their business expansions at reasonable costs" he said.

The Eurobond will have the effect of reducing lending rates within the country because it reduces government borrowing from local banks.

President Kenyatta said his Government will soon implement more measures to reduce interest rates.

Under the new plan all banks will use a reference rate to be determined periodically by the central Bank of Kenya as a basis for pricing credit. Banks will have to disclose any premium they place above the reference rate.

Government will also promote full disclosure of bank charges to facilitate informed banking decisions by the public, said President Kenyatta.

Other measures include modernising the Lands and Companies Registries, operationalising the revised Credit Reference Bureau, implementing the Treasury Mobile Direct system and fast-tracking capital markets reforms.

The Government has also submitted to Parliament the National Payment Systems (NPS) and has implemented legislative amendments to facilitate banks to utilize a standardized charge document and simplify valuation process

The President also announced that Kenya has been upgraded from the dark grey list of the anti-money laundering regime.

He also announced the Government will facilitate lines of credit for large housing development projects targeted at lower income buyers for owner occupation.

Treasury Cabinet Secretary Henry Rotich said Kenya's debt levels were low at 50 per cent of GDP and it can continue borrowing up to 75 of its GDP.

He said more than 66 per cent of the bond was lapped up by US investors.

Also at The State House press conference were Njuguna Ndungu (Central Bank governor), Njee Muturi (Solicitor General) and Kamau Thugge (Treasury Principal Secretary).0.

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