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Kenya eyes huge bond issue for economic turnaround

Increased scrutiny

At the Nairobi conference, which carried the optimistic title ‘Ready for Take Off’, there was nevertheless some cautious sentiment.

The meeting coincided with the second week of the trial of Kenya’s Vice President William Ruto, who is accused of masterminding some of the 2007-2008 ethnic unrest that left at least 1,100 dead and more than 600,000 homeless.

President Kenyatta is also facing charges of stoking the violence, and his own trial begins at the Hague-based International Criminal Court on November 12. He also denies the accusations.

The IMF’s Sayeh asserted that both politicians were cooperating with the ICC and that investors did not appear to have been put off.

However, a Western source said the ICC trials added “a degree of political instability” to Kenya’s outlook — especially if either takes the course of non-cooperation and arrest warrants are issued.

Sayeh said Kenya’s fiscal conduct “will be more closely scrutinised”, noting that the conditions of its other fresh debt — $5 billion of infrastructure deals with China signed last month — would also have to be examined.

“It will be very important to continue the efforts on the fiscal side that are underway to have a medium-term fiscal policy that is seen to be well crafted,” she said. “Kenya will have to continue to be prudent over what it borrows and what it borrows for.”

Charles Robertson, global chief economist at Renaissance Capital and an emerging markets specialist, warned that banks, which get paid to organise bond placements, encourage Kenya to borrow too much.

“The risk is that they borrow too much, that the budget deficit, the current account deficit get too large and that the economy overheats.”

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