Treasury wants counties to raise funds via bonds

June 30, 2015
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The Treasury Cabinet Secretary Henry Rotich says the new move will help ease overreliance of county governments on the national government for financing/FILE
The Treasury Cabinet Secretary Henry Rotich says the new move will help ease overreliance of county governments on the national government for financing/FILE
NAIROBI, Kenya, Jun 30 – The National Treasury has come up with a borrowing framework that will see county governments access other financing avenues especially bonds issuance at the Nairobi Securities Exchange (NSE).

The Treasury Cabinet Secretary Henry Rotich says the new move will help ease overreliance of county governments on the national government for financing.

Rotich says the new regulation is at the moment awaiting approval of the Senate, before its implementation.

“There is a very clear way of how counties will borrow, by way of raising money through bonds among others; but of course with guarantee from the national government. We have set out a borrowing framework that is now awaiting approval and give counties an opportunity to raise funds for investing in critical development projects,” Rotich said.

He says at the moment over 60 percent of the budget is being used for recurrent expenditure hence the need to seek alternative source of financing of key projects.

The new framework will however not allow raising of funds for any recurrent expenditure but will rather focus on long term and specific projects like roads, and power among others.

NSE Chairman Eddy Njoroge has urged the counties to embrace the new move adding that this will help accelerate the level of economic development in the counties compared to the current pace.

“As the NSE, we urge the county government to ease the revenue dependence on national government by working with us and the other markets players to develop innovative investment vehicles to finance their development programs,” Njoroge urged.

The two were speaking on Tuesday morning during the bell-ringing ceremony for Centum’s Sh6 billion bond. The five-year corporate bond was oversubscribed by 38 percent attracting bids worth Sh8.3 billion.

READ: Centum’s Sh6bn bond oversubscribed by 38 percent

The firm plans to fund new investments in power plants and real estate. Among the projects include the Two Rivers project, a lifestyle mall set to open in October this year and which will be one of the largest retail malls in Sub-Saharan Africa.

Centum’s power projects include Amu Power, a coal power plant in Lamu, as well as geothermal projects in Olkaria.

This year, the Nairobi Securities Exchange has listed a total of Sh13.9 billion in corporate bonds, all of which have been oversubscribed.

“The success of Centum’s bond and those of other corporate debt issues is a clear indication of depth of capital markets as a good avenue to fund well-structured strategic initiatives,” Njoroge said.

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