The Treasury has signalled it will borrow afresh to retire maturing debt — including an expensive syndicated loan — which fall due in the course of this year.
Treasury bonds totalling Sh63.1 billion, as well as a two-year $750 million (Sh75 billion) syndicated loan taken in 2015, mature this year.
PS Kamau Thugge termed as “normal” the strategy of borrowing to repay dues, and ruled out the possibility of a government cash crunch due to debt servicing pressures amid competing budgetary requirements.
“This is normal. This is how countries operate, you roll over maturing debt. That is how liability management works,” Dr Thugge said at a budget forum. “We don’t see a cash crunch this year.”
Kenya has previously borrowed to settle a syndicated loan that was falling due and some T-bonds have recently been re-opened to raise cash for redemptions.
The first use of the $2.75 billion (Sh275 billion) raised through a Eurobond floated in 2014 was to retire a costly $604.5 million syndicated loan Kenya had borrowed from commercial banks in 2012.
The other syndicated loan falls due in October and was borrowed at an interest rate of eight per cent per annum. It was taken at the height of a government cash crunch in 2015.
The loan was arranged by Citigroup, Standard Bank and StanChart.
The fixed-income securities about to fall due are listed on the Nairobi bourse and are all on fixed coupon rates.
First in the queue is a Sh31.07 billion five-year bond which matures on May 28, priced at 11.855 per cent.
A two-year Sh18.7 billion T-bond matures on June 26 and has a yield of 12.629 per cent, and an 11-year bond of Sh4 billion with a rate of 13.75 per cent needs to be repaid on September 11.
There is also a 10-year Sh9.3 bond with a coupon rate of 10.75 per cent that falls due October 16.
The fiscal deficit in the budget for the fiscal year beginning July 2017 is about Sh523 billion, and the Treasury says this will be equally funded through domestic and external borrowing.
Kenya’s public debt has now surpassed the Sh4 trillion mark after chalking up an additional $1.55 billion (Sh155 billion) in external debt a fortnight ago through multiple syndicated loans arranged by a consortium of banks.
This included a $800 million two-year syndicated loan arranged by StanChart, Standard Bank, Citi, and Rand Merchant Bank, $500 million facility from Cairo-based Afreximbank; and $250 million from Trade and Development Bank, formerly PTA Bank.
Credit: Business Daily