Felix Njini

Kenya seeks banks’ advice on raising $1.5bn Abroad

Kenya has invited banks to submit proposals on how it can tap international markets for as much as $1.5 billion to finance a budget deficit and boost foreign-currency reserves, according to a person with direct knowledge of the matter.

East Africa’s largest economy will return to the international debt market in the first quarter of 2017, when it will either seek to secure financing through a commercial loan, bond or use a combination of the two, depending on what banks see as the best option to structure the financing arrangement, according to the person who asked not to be identified because they’re not authorized to speak on the issue.

If a decision is taken to issue a bond, it would probably be targeted at private investors, and the debt may attract 8.5 percent to 9.5 percent interest, depending on the length of tenure, according to the person.

Treasury Principal Secretary  Kamau Thugge didn’t respond to text messages and phone calls seeking comment. On Nov. 15, he said that Kenya will raise 153 billion shillings ($1.5 billion) in the 2016-17 fiscal year through commercial borrowing and that international investors “are very much willing to lend to Kenya.”

The government will announce a lead arranger next week, a second person with direct knowledge of the matter said, asking not to be identified because they aren’t authorized to comment publicly on it.

Kenya raised $2.82 billion in debut Eurobond sales in 2014. Yields on the nation’s 10-year Eurobond climbed 9 basis points to 7.85 percent by 3:26 p.m in the capital, Nairobi. The nation has an estimated financing gap equivalent to 9.6 percent of gross domestic product this year, from 7.2 percent in 2015, according to the World Bank.