The money will also be used for the repayment of Sh52.4 billion syndicated loan incurred in the 2011-2012 financial year which matures in August 2014.
The President said the bond will cut the government’s local borrowing and help reduce interest rates.
“With the additional available resources in our banking system, we expect domestic interest rates to decline which should boost investments, economic growth and provide more employment opportunities to our youth,” President Kenyatta said.
Before pricing, the bond received 500 percent oversubscription with a total demand amounting to Sh769 billion ($8.8 billion) compared with the original target of Sh131.2 billion ($1.5 billion) with the government resisting a large size not to raise funding beyond the requirements.
The president also says the Eurobond will also provide benchmarks for Kenyan firms seeking to access funds on international markets.
“Access to such external funds for both the public and private sector means that there will be more resources available in our financial system for lending to local investors,” the president said.
The Bond comprised $500 million (Sh43.8 billion) at an interest rate of 5.87 percent with a five year maturity (2019) and $1.5 billion (Sh131.6 billion) at an interest rate of 6.87 percent with a maturity of 10 years (2024).
Treasure Cabinet Secretary Henry Rotich says that most of the five year bond was held by United States of America investors at 66 percent, followed by the United Kingdom investors at 17 percent, Europe at 13 percent while Middle East and Asia was at 3 percent.
In this bond, fund managers held 87 percent, while banks and pension funds held 7 percent and 6 percent respectively.
USA investors also dominated in the 10 year bond at 68 percent, followed by the UK at 25 percent, Europe at 4 percent while Middle East and Asia was at 2 percent with fund managers holding 84 percent, banks 13 percent and pension funds at 3 percent.
Rotich says that sound macroeconomic management, stable credit rating and a diversified economy with strong private sector were the drivers of the successful issue.
“Other drivers were low external debt levels, as well as the country being a gateway to eastern Africa and an important host of large international corporations, progressive reform agenda with focus on infrastructure and well developed banking system and domestic capital market,” he said.
The bond is already listed in the Irish Stock Exchange with good liquidity closing at 102 percent bid on the first day of trading.
The successful fund raising comes even as terrorist attacked Mpeketoni town on Sunday night, which left more than 65 people dead with the UK and the USA issuing travel advisories over insecurity.
The bond is also expected to bridge a Sh342 billion deficit in the Sh1.8 trillion 2014/2015 budget.