Kenya to Sign $800 Million Syndicated Loan with Four Banks

Kenya is set to sign USD 800 Million three-year syndicated loan financing facility with a consortium of four banks to fund infrastructure projects and steady the shilling.

The three-year facility with Citigroup Inc., Standard Bank Group Ltd., Standard Chartered Plc and Rand Merchant Bank on Tuesday according to Genghis Research.

The National Treasury through the Central Bank of Kenya is issuing a 12-year amortized Infrastructure Bond (IFB 1/2017/12) with an effective tenor of 8.8 years, and a coupon of 12.5%, in a bid to raise Kshs 30.0 bn for partial support of infrastructural projects in the roads, energy and water sectors.

Kenya plans to raise 154 billion shillings through external borrowing in the current budget year that ends June 30, to finance a deficit estimated by the Treasury at 9.6 percent of gross domestic product.

According to data from the National Treasury, Kenya’s foreign debt repayment came in at Kshs 15.5 bn for the quarter ending September 2016, with China accounting for approximately 42.0% of the repayments, coming in at Kshs 6.4 bn, comprising a principal amount of Kshs 1.1 bn and interest payments worth Kshs 5.3 bn.

The country also repaid Kshs 4.8 bn to the International Development Association (IDA), an arm of the World Bank that offers concessional funds to low-income and post-conflict countries, with the repayment of Kshs 1.1 bn and Kshs 1.0 bn being made to France and Japan, respectively.

“However, going forward, there are risks associated with the changing funding patterns that could see the debt levels continue to rise, and are already above the 50.0% threshold set by International Monetary Fund (IMF) for frontier markets, currently at 54.9% of GDP as per the Annual Public Debt Management Report for the year ended June 2016,” Cytonn Investments Investor brief states.

• Read: 
• Kenya Risks Being Downgraded Due to Swelling Debt
• Kenya’s Debt Sustainability: Is Country on the Right Track?

The Government is ahead of its domestic borrowing for this fiscal year having borrowed Kshs 168.2 bn for the current fiscal year against a target of Kshs 150.1 bn (assuming a pro-rated borrowing throughout the financial year of Kshs 229.6 bn budgeted for the full financial year).