The Treasury has signalled an uptake of syndicated loans after raising its target for commercial financing in the 2023/24 fiscal cycle.
Commercial financing targets have been raised from the previous estimate of Sh270 billion to Sh467 billion, indicating the exchequer would be leveraging funding from the international capital markets.
The upward revision in external commercial financing has resulted from the reduction in net domestic financing.
Previously, the National Treasury expected to tap only Sh270 billion from external commercial loans, largely to meet the refinancing of the Sh294.5 billion ($2 billion) Eurobond maturity in June this year.
The exchequer says additional commercial financing from the international capital markets could take various forms.
“It can be a syndicated loan or it can be a loan taken from a bilateral creditor under commercial terms. The increase in external commercial financing is explained by the reduction of net domestic financing,” Public Debt Management Office director-general Haron Sirima told the Business Daily.
The Treasury has hit the road running in tapping funds from the international capital markets with sources indicating the exchequer is set to close in on a Sh147.2 billion ($1 billion) syndicated loan as soon as next month.
Kenya returned to the international capital markets earlier this year after a hiatus enforced largely by untenable interest rates, raising Sh73.6 billion ($500 million) in July.
The target for net foreign financing has been raised to Sh448.7 billion from a lower Sh131.5 billion.
This also factors in the prospects of additional programme loans that are now estimated to rise to Sh278 billion from Sh65.4 billion.
The higher programme loans signal improved access to financing from multilateral lenders including the World Bank, the IMF, the African Development Bank, and the Trade and Development Bank.
Net domestic financing has been cut to Sh415.3 billion from Sh587.4 billion with the trim being tipped to ease pressure on domestic interest rates alongside the reduction of the government’s crowding out of the private sector.
Kenya’s external borrowing in the cycle to June 2024 is nevertheless set to be dominated by the refinancing of the 2014 Eurobond with the exchequer having lined up options to meet the bullet payment.
The Treasury has engaged Citi and Stanbic as advisers on the upcoming Eurobond maturity.
The lead managers are expected to set down a timetable detailing milestones, including a potential buyback of part of the bond’s holders and currency options.
“The lead managers will provide us with that advice. Only they can pronounce themselves on the issue,” Dr Sirima added.