The National Treasury has been advised to issue a bond to international investors denominated in shillings instead of dollars.

The Capital Markets Authority (CMA) says issuing a Kenya shilling bond and cross listing it in London and the Nairobi Securities Exchanges would reduce pressure on repayments as well as the amount.

For instance, for every shilling borrowed for dollar loans such as the Eurobond in 2014 at around Sh87 against the dollar, it will be repaid at Sh102.2 per dollar, or higher if the shilling depreciates further.

“Kenya should consider determining a balanced mix of both foreign denominated and local currency international debt issuances to minimise its risk of exposure to foreign exchange rate risks which result in increased costs of debt servicing,” said CMA Regulatory, Policy and Strategy Director Luke Ombara.

The cost of African Eurobonds is rising because of currency weakness, which till now Kenya has avoided.

In the case of Ghana, the nominal value of its $750 million, 2007 Eurobond was $3.4 billion in 2017. A similar trend is discernible in the case of Nigeria, which issued $500 million worth of Eurobonds in 2011. By 2017, the nominal value had risen to $966 million.

CMA also urged Treasury to opt for a Diaspora bond, or concessional loans that have very low interest rate.

Kenya hopes to borrow more to repay a commercial loan from Britain’s Standard Chartered Bank amounting to $766 million (Sh76.6 billion) in March as well as a $750 million (Sh75 billion) five-year Eurobond by June.

Another Sh37.1 billion syndicated loan arranged by Trade and Development Bank (formerly PTA Bank) will be due, bringing the total loans to be paid in six months to Sh200 billion.