Kenya Set To Float A $2 Billion Eurobond

Kenya plans to raise $2 billion from the international market in the next fiscal year (2023-2024) to repay a 10-year Eurobond maturing in June 2024.

The National Treasury has invited expressions of interest from reputable financial institutions to provide transaction advisory services for the proposed Eurobond.

Kenya’s Public Debt came in at Kshs 9.1 trillion (equivalent to 63.0% of GDP) as of December 2022, an 11.2% increase from the Kshs 8.2 trillion (66.2% of GDP) recorded in December 2021. 

Additionally, the public debt to GDP is expected to marginally decline to 60.0% in 2023, on the back of the government’s continued focus on prioritizing the payment of debt obligations. 

Factors that have accelerated the growth of Kenya’s public debt

Fiscal Deficit: Kenya has witnessed a persistent fiscal deficit averaging at 8.1% of the GDP for the last 10 financial years and is projected to come down to 6.1% of the GDP at the end of FY 2022/2023.

The controller of budget highlights in the Budget Implementation Review Report for H1’2022/2023 that the current approved budget stands at Kshs 4.2 trillion against a targeted revenue collection of Kshs 2.1 trillion, hence the need to borrow an additional Kshs 1.0 trillion domestically as well as Kshs 349.3 bn of externally.

Debt Servicing Costs: Debt servicing cost has increased over the years mainly due to the continuous accumulation of external debt and the depreciation of the currency. 

Consequently, the higher cost of debt servicing has continued to put further pressure on debt sustainability and the Kenyan shilling. 

Shortfalls in Revenue Collections: Though there has been significant growth in tax revenues, the Kenya Revenue Authority (KRA) has consistently fallen short of its tax revenue targets, which has been complemented by increased borrowing both locally and externally to plug the budget deficits, increasing the country’s debt profile over time.

Guaranteed loans by the Government of Kenya: The total number of state corporations guaranteed loans by the government as of December 2022 was Kshs 164.6 billion. 

Such guaranteed loans put pressure on the need for excessive spending, despite poor performances by the state corporation, resulting in borrowing to finance the loans.

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