NAIROBI, Kenya, Jan 28 – The government has postponed plans to raise Sh33 billion through a Sovereign Bond.
Finance Minister Uhuru Kenyatta said on Wednesday that the cancellation was necessitated by the poor performance of global financial markets.
“It will be imprudent and actually suicidal to go to the market at a time like this,” Mr Kenyatta noted.
He was speaking during the launch of the Sh18.5 billion, 12-year Infrastructure Bond that the government intended to finance a number of infrastructure projects in the country.
He said the bond would attract a 12.5 percent interest, which would be paid through the tax payers funds as opposed to revenues raised through the various infrastructure projects. The Minister noted that this would be one of the best ways of creating a proper entry point for this kind of investment tool.
“The bond will be launched on February 23 with the minimum participation allowed pegged at Sh100,000, so as to allow small scale investors to participate,” the new Finance Minister explained.
The targeted Sh18.5 billion will be used to fund water and sewerage projects at Sh4.15 billion, the roads sector at Sh6.43 billion and Sh7.09 billion for the energy sector.
Mr Kenyatta reiterated the need for issuing this bond, observing that the government cannot meet the funding needs for infrastructure development on its own.
Speaking at the launch, Central Bank Governor Professor Njuguna Ndungu expressed optimism that the bond would be fully taken.
“I know Kenyans have savings totalling Sh850 billion, attracting an interest of 2.5 to four percent annually, which means they have the money we are looking for,” he said.
Prof Ndungu said the ultimate target of the Bond was to create appropriate tools within which investors can invest in the country.
“In Kenya we have a supply constraint of investment projects that investors can safely use to grow their money,” he observed, adding; “at the same time, they want to see projects they can slice to affordable prices and that’s why I’m confident that the liquidity in the market will work well for us.”
The CBK governor further assured that floating of the Bond should not in any way lead to a rise in interest rates in the country.