Kenya seeks Sh84bn for budget deficit

The government has set the stage to borrow over Sh84 billion from the international markets next year between the period January to June 2014 in order to help finance a Sh329 billion budget deficit.

The National Treasury has already indicated that it is targeting the European markets through the issuance of a Eurobond where it said it expects to get cheaper credit.

In an advertisement, the National Treasury is requesting the services of lead transaction and legal advisors that will guide it through the exercise.

“The government of the Republic of Kenya through the National Treasury is considering accessing the international capital markets by the second half of calendar year 2013 to issue a sovereign bond,” read the advertisement.

Through this, the Treasury says that it will act as a reference point in its subsequent borrowings from the offshore markets in case it will in future look to international money lenders in times of need.

“Through the proposed transaction, the government intends to diversify its investor base and establish a pricing benchmark for future issuance of such bonds by both the private and public sector,” said the Treasury.

The money will primarily be used to finance infrastructure projects.

Speaking on Tuesday during a bell ringing ceremony to welcome I&M holdings to the Nairobi Securities Exchange, Central Bank Deputy Governor Haron Sirma alluded Treasury’s expectations on this debut issue.

“There is a lot of foreign investor participation in the NSE and that persisted even in the first half of the year which shows a lot of confidence in our markets,” said Mr Sirma.

Mid last year, the government borrowed Sh50 billion through a syndicated loan from 13 international banks such as The Hong Kong and Shanghai Banking Corporation, FBN Bank, Bank of India, Bank Muscat and British Arab Commercial Bank.

The loan was priced at a premium of 4.75 per cent above the London Interbank Offered Rate (Libor).

In a press briefing last week, the National Treasury Secretary Henry Rotich said that Kenya was yanking away from borrowing from the domestic markets which has hitherto squeezed out private sector borrowing from banks - which are usually the biggest lenders to government - local credit market.