NAIROBI, Kenya, Feb 22 – The National Treasury has announced that the new $2 billion Eurobond has been oversubscribed seven times.
This follows a roadshow in Europe and the US conducted with international investors resulting in a significant level of interest expressed in the issue.
“The fact that we got $14 billion in investor appetite reflected the continued support the country receives. We now have a dollar yield curve stretching out to 30 years, making Kenya one of only a handful of governments in Africa to achieve this,” reads a statement from the National Treasury.
With a 30-year yield at 8.25 percent interest rate, treasury says investors have shown an appetite for their long-term belief that Kenya is a stable economy in which long-term investments are safe.
Over a third of the funds that the Government has raised will go towards settling debts that are due for repayment while the balance will be used for development initiatives.
“We will continue to invest in the infrastructure and capacity to roll out these programmes.”
Nabo Capital Investment Analyst Cliff Bakashaba says Kenya’s long-term bond will allow other African countries benchmark their international bonds.
“Anyone who wants to issue a new bond will have a new reference point so Uganda can come out and say since Kenya’s bond is trading at 8.25 percent I can price mine at 9 percent,” says Bakashaba.
However, the recent issue will increase Kenya’s debt burden with debt to GDP likely to edge towards the 60 percent mark in FY 2018/2019, from 42 percent in 2013, with the International Monetary Fund today cautioning that Kenya’s budget deficit level is heading to the red zone.
IMF Chief of Mission Ben Clements has told the National Assembly Budget Committee that efforts must be made to reverse the fiscal deficit which currently stands at 8.9 percent of GDP.
Chair of the Budget Committee Kimani Ichung’wa, however, said the National Treasury is keen on bringing down the fiscal deficit below 7.5 percent in the next financial year.