Capital Markets

Kenya seeks debt expert ahead of Eurobond issue

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Treasury Cabinet Secretary Ukur Yatani. FILE PHOTO | NMG

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Summary

  • The Treasury is seeking experts to help the country restructure its external commercial loans to reduce the cost and improve its debt sustainability measure.
  • The Treasury said in a notice on Tuesday that the expert will be tasked with drawing up the best options for Kenya to restructure its liabilities sustainably, which might include taking up new cheaper loans to retire older, more expensive debt.

The Treasury is seeking experts to help the country restructure its external commercial loans to reduce the cost and improve its debt sustainability measure.

The Treasury said in a notice on Tuesday that the expert will be tasked with drawing up the best options for Kenya to restructure its liabilities sustainably, which might include taking up new cheaper loans to retire older, more expensive debt.

"The government seeks to appoint a Sovereign Debt Advisory firm to support the National Treasury in debt liability management in respect of part of part of its commercial debt," read the notice in part.

"The main objective of the assignment is to provide liability management advisory services to the Government of Kenya to restructure some external commercial debt to lower costs and risks in the public debt portfolio and improve debt sustainability."

The move comes at a time when the country has started to feel the heat of servicing the huge borrowing from recent years, partly due to the Covid-19 pandemic that has hit the balance of payments.

Last year, the government obtained a bilateral debt repayment holiday worth Sh33 billion with the Paris Club of international lenders and followed that up with a repayment moratorium worth Sh27 billion from China.

In the upcoming 2021/2022 fiscal year, the country plans to borrow a net of Sh937.6 billion to finance its budget deficit, out of which Sh345.5 billion will be externally sourced.

Total debt service during the year will account for Sh846.8 billion, comprising Sh587.6 billion in interest payments and Sh259.2 billion in principle repayments.

Part of the government’s plan to reduce the cost of external borrowing has been to turn to concessional loans, but the Treasury has recently pointed to an upcoming Eurobond issuance that will partly be used to roll over the maturing 10-year Eurobond issued in 2014.