Kenya Eyes $2.27 Billion Eurobond in Shift Back to Foreign Debt

(Bloomberg) -- Kenya plans to raise more money from foreign than domestic sources as it rearranges its borrowing portfolio to take advantage of appetite for high-yielding debt.

The East African nation intends to raise 123.8 billion shillings ($1.13 billion) in sovereign bonds in the next four months and an additional 124.3 billion shillings during the fiscal year starting in July, according to the National Treasury. The funds will help finance the budget.

The government is tilting away from high-interest domestic borrowing to maximize concessional and semi-concessional external debt, Treasury said its medium-term debt management document. Commercial foreign loans will be limited to financing projects with high financial and economic returns, according to the document submitted to the National Assembly on Feb. 11.

The Treasury is targeting a foreign-to-domestic net-borrowing ratio of 57:43 in the plan covering 2021-24, compared with 21:79 in the past fiscal year. The government has previously said it wants to limit its external debt exposure to mainly concessional loans.

“It is a good time to issue a Eurobond, as there is certainly appetite for higher-yielding debt,” said Yvonne Mhango, head of sub-Saharan economic research at Renaissance Capital. “Given the stretched fiscal finances, concessional loans would be a more affordable and sustainable source of financing. Either way, the proceeds of the foreign loan will help the authorities shore up foreign exchange reserves and support the shilling.”

Kenya’s public debt stood at 7.28 trillion shillings by the end of December, equivalent to 65.6% of gross domestic product in nominal terms, according to the government data. The Treasury wants the statutory debt ceiling lifted to above 9 trillion shillings to accommodate anticipated fiscal deficits from 2021-22, according to the document.

A target to narrow its fiscal deficit to 3.5% of GDP has eluded Treasury, which now expects to hit that goal by 2024-25, according to the document. This year, the nation estimates a financing hole at 8.9% of GDP.

Additional Borrowing:

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