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More debt pile up as Treasury takes Sh52bn long-term loan

henry rotich

Treasury Cabinet Secretary Henry Rotich. PHOTO | HENRY ROTICH | NMG

The Treasury has signed a $500 million (Sh51.5 billion) long-term loan agreement with the African Export-Import Bank (Afreximbank) and Trade and Development Bank (TDB), formerly PTA Bank, pushing Kenya further into debt.

The two-tranche syndicated loan deal was closed on Monday in Nairobi by the Treasury.

The facility, for which Afreximbank and TDB acted as joint mandated lead arrangers, is part of a three-facility $1.55 billion (Sh154.6 billion) package being arranged separately by the Treasury in the first quarter of 2017 to finance State spending.

The Afreximbank and TDB-led facility comprises two tranches of $200-million (Sh20.6 billion) 10-year amortising loan by TDB and a $300-million (Sh30.9 billion) five-year amortising loan provided in equal parts by Afreximbank and TDB.

The lenders said the two tranches will be syndicated to development finance institutions.

By providing five and 10-year financing, Afreximbank and TDB, said they had set new tenor benchmarks for future borrowings by the government noting the longer-tenors provide significant additional value to the State, which has been seeking to gradually replace its shorter-term liabilities with longer dated ones.

READ: Treasury pushes Kenya into more debt with fresh Sh82 billion loan

Stands out

“This debt raising exercise stands out in more ways than one - as an achievement in the syndicated loan market, as a confirmation of investor confidence for Kenya and as a further step towards better facilitation of inter-African trade,” said Benedict Oramah, President of Afreximbank.

“Afreximbank’s support for the projects to be financed with the proceeds of this facility are consistent with the ‘Deliver’ pillar of our Intra-African African trade strategy, which aims to create enabling logistics infrastructure for efficient intra-regional trade.”

In December TDB approved another $250 million (Sh25.7 billion) facility to the Government.

Admassu Tadesse, president and chief executive of TDB said the bank has played a key role in raising up to $750 million (Sh77.3 billion) for Government of Kenya in this current Financial Year.

“TDB will continue financing of trade, enterprise and infrastructure, which is evidenced in the tripling of our loan assets in the past two years in Kenya a demonstration of the Banks commitment to the Kenyan Economy,” said Mr Tadesse.

Kenya has lined up a Sh2.62 trillion budget to be submitted to parliament next week but expects to collect only Sh1.7 trillion in taxes, leaving the government with a yawning funding gap.