The burden of the multi-billion-shilling Eurobond Kenya issued last year on the taxpayer has alarmed Parliament following revelations that the country will pay Sh16.4 billion in interest payments on the debt for the year starting July.
The Parliamentary Budget Committee on Wednesday directed the Treasury to go slow on commercial debt following the Eurobond exposure.
Official data shows that interest payments on bond will account for 54 per cent of the total interest payment on foreign debt in the fiscal year starting July.
Kenya borrowed $2.75 billion (Sh269.5 billion) through the Eurobond in two tranches— the first tranche of $2 billion in June last year and $750 million in December.
“External borrowing from commercial sources has taken great prominence since 2014 leading to increased foreign debt service,” said a reported tabled yesterday in Parliament by the Budget Committee.
“Even though Kenya’s debt is sustainable…future economic performance, exchange and interest rate risks and external economic shocks cannot be known for sure. Thus the committee urges caution on further issuance of commercial foreign debt.”
Investors have snapped up African bonds in recent months, eying the continent’s strong growth rates.
Kenya’s total debt is estimated at about Sh2.4 trillion, with foreign debt accounting for nearly half the borrowing.
The Treasury said it will use the dollar bond to replace declining foreign aid and domestic borrowing to finance infrastructure.
The Eurobond was a hot issue in Parliament last year when the Treasury sought MPs’ approval to pay Sh1.4 billion to two companies linked to Anglo Leasing contracts.
The bid was withdrawn in a political backlash .Legislators from the ruling Jubilee coalition vowed to block the payment until the Treasury unmasks faces behind the companies that won the award in Geneva and London international court of arbitration.
The Sh1.4 billion was later paid through a Presidential executive order, paving the way for the Eurobond that could not be issued unless all obligations related to the court awards were met.