Kenya gets 300 proposals on settling Sh275bn Eurobond

BDEurobond

The Treasury wants Parliament to allocate Sh90 million to clear legal fees for lawyers who helped Kenya raise cash and buy back a 10-year Eurobond.

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Kenya has received more than 300 proposals offering various liability management solutions ahead of the maturity of the Sh275 billion Eurobond next year.

The proposals have given the government comfort that it will be able to settle its $2.0 billion, Sh275.8 billion at the current exchange rate, Eurobond due for maturity in June 2024.

Coming on the back of last week’s credit ratings downgrade by Moody’s which saw the ratings agency reclassify Kenya to ‘very high credit risk’ status, the National Treasury says that Kenyans and global investors do not need to worry about the government’s ability to settle this maturing debt.

In the Draft Budget Estimates for the financial year 2023/24, the Treasury has budgeted Sh241.75 billion for the maturing bond, gobbling up a staggering 51 percent of the next financial year’s external debt redemptions.

Treasury says it will embark on what it terms as an ‘effective liability management’ in the financial year starting July 2023.

“On the upcoming 2024 Eurobond maturity, the Government has received over 300 proposals offering various liability management solutions, as it embarks on effective liability management in the next fiscal year. The Government had advertised for an expression of interest for Lead Managers of Eurobond holding banks to devise an efficient path to resolve the Eurobond 2024”, the National Treasury states.

The Treasury further states that it has a robust pipeline of concessional financing which should allow the country fiscal breathing space as it grapples with tightened financing conditions both domestically and externally.

The latest filings by the National Treasury reveal that with only two months of collections left in the current financial year, the government stares at a Sh1.3 trillion revenue shortfall.

Kenya is currently awaiting approval of a $1.0 billion, Sh137.9 billion, credit line from the World Bank towards budget support.

The government has also received an additional Sh162 billion loan top-up from the International Monetary Fund (IMF) as it seeks more buffers to deal with cash constraints.

“In the near term, there is a planned pipeline of foreign currency loans from the IMF, World Bank and syndicated loans that will positively impact market liquidity. In addition, the IMF MD committed to increasing financing to Kenya by deploying long-term concessional financing through the new Resilience and Sustainability Facility (RSF)”, the Treasury says.

The government has yet again reiterated its commitment that despite the elevated debt distress pressures, the government will remain committed to minimizing the risks of default on creditors.

Last week, Ghana, which defaulted in late 2022, finally inked a deal with its creditors towards restructuring the economy’s debt.

“Noteworthy also is the December 2022 Joint IMF/World Bank Debt Sustainability Report for Kenya that stated that despite facing a high risk of debt distress, Kenya has moderate debt carrying capacity and its portfolio of public debt is sustainable. It is on this basis that the New Administration is committed to manage public debt effectively and minimize any risks of default at all times”, the National Treasury states.

In the next financial year, Kenya’s debt service obligations will stand at Sh1.63 trillion up from Sh1.36 trillion in the current financial year.

In April, the National Treasury published an invitation for Expression of Interest to global banks interested in helping Kenya return to the global international market through the issuance of another Eurobond between July 2023 and June 2024.

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