Rotich starts fresh Eurobond amid fears of over-borrowing

National Treasury PS Dr Kamau Thuge during International Tax Stamp meeting Forum at Radisson Blu Hotel. [Jonah Onyango/Standard]

Kenya will have six Eurobonds if Treasury manages to borrow Sh250 billion from London and the US.

Yesterday, Treasury officials started meeting investors from the two countries to pitch for two long-term bonds of between 12 and 31 years.

This kicked off the process of the third round of borrowing from international investors, including the Standard Bank and JP Morgan Chase, an American investment bank.

In 2014, Kenya borrowed two bonds - one matures this year and the other one in 2024. Last year, Kenya took two other loans of 10 and 30 years.

Technocrats will be out to make a case for Kenya, detailing why lending Kenya is good investment. They will also be assuring lenders their money will be safe, especially in the face of China’s anxiety over loans taken to build SGR.

“We have a good sovereign rating of B+ so we are confident we’ll get a good rate,” a source told The Standard.

Kenya will get a rate depending on the current market conditions and the country’s ratings, which may favour a good rate at the moment.

Kenya’s 10-year bond that matures in 2024 is currently trading at 6.3 per cent while the other 10-year bond which matures in 2028 is trading at 7.73 per cent. The 30-year bond taken last year is trading at 8.3 per cent.

This comes as MPs push to have a say on how much Treasury can borrow.

Under the Public Finance Management Act of 2015, parliamentary oversight role was removed. MPs would have a say over the budget as Treasury drives financing agenda that blew the fuse from Sh1.7 trillion debt in 2013 to grow by 217 per cent in six years.

Emgwen MP Alexander Kosgey recently pushed a bill that will limit State borrowing to Sh6 trillion unless an adjustment is made by Parliament.

Kenya’s debt is already at Sh5.44 trillion and will soon cross the limit, especially as revenues fail.

PS Kamau Thugge (pictured) is leading the delegation on the Eurobond mission.

Among the proposed spending of the loan is part-settlement of another debt that matures next month. This confirms the vicious cycle where Kenya will keep borrowing to repay lenders.

The first portion of the 2014 Eurobond matures next month and will be repaid from the loan from US and London.

This comes amidst heated debate on Government’s appetite to borrow while the ability to repay decline.

One of the major concerns by Kenyans is what will happen if the country is unable to repay these loans.