Kenya may further delay bond issue

Kenya’s plan to raise Sh172 billion through the issuance of a sovereign bond may take even longer to hit the markets pending proposed amendments to laws governing state borrowing by the Treasury.

Government has proposed changes to the Public Finance Management (PFM) Act, 2012 some of which touch on the issuance of external securities.

Speaking to the National Assembly’s budget and appropriations committee last Wednesday, Treasury’s economic secretary Geoffrey Mwau said the amendments were necessary to pave the way for the issuance of the sovereign bond.

“The presentation by National Treasury on PFM highlighted the need for the Public Finance Management, 2012 to be amended so as to allow the issuance of the sovereign bond,” read the minutes from the meeting in part.

They are attached to the committee’s report on the Budget Policy Statement that was tabled for debate last Thursday by committee chairman Mutava Musyimi.

Proposed amendments to Section 50 of the PFM Act remove restrictions that require foreign investors to deposit funds directly into the consolidated fund.

Investors who have also been contracted to carry out government projects will be able to disburse the funds directly to suppliers.

Proposed changes to Section 53 of the PFM law would explicitly empower the Treasury Cabinet Secretary to issue “external securities and loans” as opposed to the current wording that makes provisions for “national government securities”.

The Public Finance Management (Amendment) Bill, 2014 is yet to be published. If the Treasury has to wait for the new law to come in force, the issuance of the sovereign bond, which was initially slated for September last year, could be delayed further.

“It is not a worry, though, since Jubilee controls both houses and can fast-track any process considering the president’s eagerness to deliver on his campaign promises,” said market analyst, Mr Robert Bunyi.

Early this year, Treasury Cabinet Secretary Henry Rotich said Kenya would be going to the market by the end of the first quarter or early April.

The country is planning to use funds raised through the bond to plug a funding gap in the Sh1.64 trillion 2013/2014 budget.

The government was also to route the money to settle a $600 million syndicated loan.