Kenya plans to float two new Eurobonds over the next six months to finance the budget and repay part of the maiden sovereign bond borrowed in 2014.
The Treasury told the International Monetary Fund (IMF) it plans to float an issue before the end of this month as part of the external component of budget financing for the current fiscal year, and another one by June 2022 towards refinancing the 10-year, $2 billion (Sh226 billion) bond sold in 2014.
The IMF indicates that Kenya will borrow $2.19 billion (Sh247 billion) through the two commercial loans.
The IMF made the revelation in its review of government accounts that led to the release of the additional Sh29 billion under the 38-month programme.
“Our plans going forward include: By end-December 2021, subject to favourable market conditions, authorities will issue a Eurobond to provide financing for the 2021/2022 budget. This financing was previously programmed for early 2022,” said the IMF.
“By end-June 2022, subject to favourable market conditions, issue a Eurobond to repay in full or in part the bond maturing in 2024 as part of a debt management operation.”
Kenya is hoping to speed up the Eurobond programme to get a favourable appetite, especially before the next General Election, which carries political risks that might affect attractiveness.
It is betting on a similar success to the $1 billion bond floated in June this year, which found the international debt market receptive in both demand and low rates.
The IMF has also revealed that Kenya will be doing away with the Sh9 trillion debt ceiling set two years ago as the country’s current debt stock of Sh7.7 trillion is poised to shoot past the target.
The Treasury has submitted a proposal for amendment of the Public Finance Management law on the debt ceiling to the Attorney-General and Parliament in November 2021.
The new debt anchor will be set at 55 percent of gross domestic product (GDP), with debt measured in present value terms and an accountability requirement that mandates transparent communication to Parliament and the public on plans and progress towards achieving the debt anchor within a specific timeframe.
Kenya has changed debt sustainability models over the last 10 years from a ceiling in 2014 to a percentage of the economy in 2015.
In 2019 Kenya returned to a debt ceiling which it now wants to revoke and return to the GDP metrics on demands by the IMF reforms.