World Bank warns Kenya on cash use
What you need to know:
- Mr Robert Bunyi of Mavuno Capital said the allure from international investors might drive up the cost of repayments if there is reckless usage of public finances.
- “You have to issue more bonds to refinance the Eurobond. The country will have to be in the (sovereign bond) market periodically,” he said on Wednesday during a public lecture held at the University of Nairobi.
Kenya may find it costly to refinance its Eurobond if it does not practise prudent fiscal spending, market experts have warned.
According to World Bank senior director (global practice on macroeconomics and fiscal management) Marcelo Giugale, the country will also have to float other bonds to avoid defaults and remain relevant in the international debt market.
“You have to issue more bonds to refinance the Eurobond. The country will have to be in the (sovereign bond) market periodically,” he said on Wednesday during a public lecture held at the University of Nairobi.
Mr Robert Bunyi of Mavuno Capital said the allure from international investors might drive up the cost of repayments if there is reckless usage of public finances. “The true test of the refinancing is prudence in spending; you have a good idea where you want to put the money, you have quick investment ideas, which deliver quick returns. Then Kenya will be rewarded,” he said.
HIGH YIELDS
African countries have turned to international bond investors due to the high yields as they seek to realise their development goals.
Kenya’s Eurobond, which was divided into $500 million five-year and a $1.5 billion 10-year tranches, raised $2 billion in June. The bond is to be refinanced at 5.875 per cent for the $500 million tranche and 6.875 per cent for the $1.5 billion bond.
The risky undertaking may see changes in interest rates if subjected to general market shocks in the sovereign market, especially the devastating Ebola nightmare. So far, 14 countries have issued sovereign bonds to bolster their cash-strapped coffers.
