Treasury Set To Sign a Syndicated Loan to Refinance another Loan

The government is set to sign a new syndicated loan of an undisclosed amount to refinance a previously received syndicated loan amounting to USD 750 million which is set to mature in April 2018 after 6 months extension.

However, the government also has the option to go back to the international debt market and issue a new Eurobond to aid settling its maturing obligations. So far, the government has only borrowed 18.0 billion shillings from the foreign market for the current fiscal year translating to 6.8 percent of its foreign borrowing target of 277.3 billion shillings for this fiscal year against a prorated target of 101.7 billion.

Given the current debt levels of the country at 54.4 percent of GDP from 48.0 percent 3-years ago, above the IMF recommendation of 50.0 percent of debt to GDP for frontier and emerging markets, more debt if mismanaged could have adverse impacts on the economy.

The cost of borrowing for countries in these markets could be at a premium compared to the developed markets but global investors still have the appetite for African debt following the successful issuances by Nigeria and Ghana that received approximately 8.0x and 5.0x subscription rates in 2017 and 2016, respectively.

Below is a chart showing the evolution of the total debt to GDP over the last ten years for Kenya:

READ: Digging a Hole to Fill another Hole: Case of Kenya’s Eurobond

The Kenya Shilling appreciated by 0.1 percent against the US Dollar during the week to close at 103.6 shillings from 103.7 shillings recorded the previous week supported by subdued dollar demand by importers.

On a year to date basis, the shilling has depreciated against the dollar by 1.1 percent with economic analysts saying that the shilling is likely to remain resilient against the US Dollar even as political uncertainty continues to reign in the country. For the month of October, the shilling had an overall depreciation of 0.5 percent against the US Dollar.