Kenya raises $ 1 billion from the sale of oversubscribed Eurobonds


Friday, June 18, 2021 / 4:25 pm / by David Herbling from News24 / Header Image Credit:

Kenya raised $ 1 billion (over R14 billion) on its first Eurobond sale in two years as the East African nation balances between needing to fund its economic recovery and reducing its debt burden.

The 6.3% yield 12-year bonds received more than $ 5.4 billion in orders after a three-day virtual roadshow, the National Treasury said in a statement on its Twitter account on Thursday.

“The oversubscription was a sign of the strong confidence that investors around the world have in the Kenyan economy and the medium-term economic outlook,” Finance Minister Ukur Yatani said in the statement.

The government is forecasting economic growth of 6.6% this year from 0.6% in 2020 as it recovers from the effects of the coronavirus pandemic. Authorities are hoping for a recovery in revenue to bring their budget deficit down to 7.5% of gross domestic product in July 1 from an estimated 8.7% in the current period.

According to Neville Mandimika and Daniel Kavishe, analysts at Rand Merchant Bank in Johannesburg, investors have been optimistic about the economic recovery since signing an international fund program earlier this year. It “assures the bondholders that the authorities can consolidate this year for tax purposes,” it said in a message to customers.

Citigroup and JPMorgan Chase & Co. co-managed the sale with I&M Bank Kenya and the NCBA Group.

Kenya faces a budget gap of approximately $ 8.6 billion in 2021-22, which it plans to fill with external and domestic debt. The cost of public debt servicing is likely to rise to a record 1.17 trillion shillings ($ 10.8 billion or rand 154 billion) in the year, according to the parliamentary budget bureau, which is about two-thirds of government revenue.

According to the IMF, Kenya plans to raise up to 7.3 billion dollars on the Eurobond market over the next two years. However, according to Haron Sirima, head of the Debt Management Office, the government is taking a cautious approach to commercial borrowing to ensure debt sustainability.

“Despite the oversubscription and competitive pricing, we have maintained the discipline of our target amount,” said Sirima. “We are optimistic that Kenya will successfully implement liability management in the next fiscal year in line with its debt strategy of reducing costs and minimizing risk in its sovereign debt portfolio.”


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