The Central Bank of Kenya (CBK) has warned that there is less headroom for external borrowing even as it disclosed that it wired Sh202 billion ($2 billion) of proceeds of Eurobond II from Citi Bank in New York to the Treasury account in Kenya on March 12, 2017.
CBK Governor Patrick Njoroge told Parliament that there is need to move into non-debt financing arrangements.
“There is less headroom for external borrowing and we need to move into non-debt financing arrangement like the Sh230 billion road from Nairobi to Mombasa. We should move from the old song of borrow and invest,” Dr Njoroge told the Finance, Planning and Trade committee chaired by Kipkelion West MP Joseph Limo.
Dr Njoroge, however, cautioned that the non-debt financing model does not just mean creating public private partnerships (PPP).
“We must also be weary of currency issue in terms of external shocks, which is an issue of great concern to us when borrowing,” the CBK boss said.
Mr Limo’s committee had summoned Dr Njoroge to explain among other things the role of the banking sector regulator in the management of public debt.
“We have borrowed externally and domestically including the recent Eurobond II. We want you to tell us what is cheaper. Is it borrowing outside or domestically?” Enorch Kibunguchy, the MP for Lukyani asked.
Dr Njoroge told legislators that the National Treasury is the principal and manager of public debt domestic debt while CBK is the agent.
“CBK’s primary responsibility relates to issuance, management (registrar function) and redemption of government securities on behalf of the Treasury,” he said.
He, however, disclosed the CBK was involved in the $2 billion Eurobond, the second in a span of four years, which sparked concerns over the rate at which Kenya is accumulating local and foreign debt.
“We were involved in Eurobond in terms of pricing,” Dr Njoroge said.