5 February 2018

Kenya: Offers for U.S.$350 Million Infrastructure Bond Back on the Table

Photo: Salaton Njau/Nation
(file photo).

Kenya reopened the sale of its infrastructure bond after barely a week, hoping that investors will temper their pricing after it sent out a message that it was not willing to take expensive cash by rejecting Ksh50 billion ($500 million) in the first sale.

The Treasury hoped to raise Ksh35 billion ($350 million) in the tap sale which closed on Friday. In the first sale investors had offered Ksh55.7 billion ($557 million) at an average 13 per cent.

The government rejected the bulk of cash taking in Ksh5 billion ($50 million) priced at an average 12.5 per cent.

"Given the low level of debt absorption, the Central Bank has announced a tap sale on the issue seeking to raise Ksh35 billion ($350 million) from the market."

The quick return to market underlines the governments need for debt to complement the underperforming revenue collections.

The Treasury has increased its borrowing plans by Ksh68 billion ($680 million) following a Ksh52.6 billion ($526 million) shortfall in revenues in the first five months of the current financial year.

Domestic borrowing has been increased by Ksh18 billion ($180 million) which will see the government borrow Ksh293.8 billion ($2.9 billion) from the local market this year up from the budgeted Ksh275.6 billion ($2.7 billion).

The disclosure has seen investors lure the government into taking higher priced money.

Government is determined to keep the rates low not only to rein in the interest burden but also in fear of crowding out the productive private sector from the credit market.

With interest rates capped at 14 per cent, a high borrowing rate by the government would see bankers, who are the biggest investors in treasury securities, offer their money to the state while pulling back from private investors who are perceived to be more risky.

More on This

Kenya's Sendy Plans to Go Nationwide in 2018 and Is Looking At East African Expansion

You can always find a driver to do a delivery in Kenya but you don't know when the parcel has arrived and whether the… Read more »

Copyright © 2018 The East African. All rights reserved. Distributed by AllAfrica Global Media (allAfrica.com). To contact the copyright holder directly for corrections — or for permission to republish or make other authorized use of this material, click here.

AllAfrica publishes around 800 reports a day from more than 140 news organizations and over 500 other institutions and individuals, representing a diversity of positions on every topic. We publish news and views ranging from vigorous opponents of governments to government publications and spokespersons. Publishers named above each report are responsible for their own content, which AllAfrica does not have the legal right to edit or correct.

Articles and commentaries that identify allAfrica.com as the publisher are produced or commissioned by AllAfrica. To address comments or complaints, please Contact us.