With high interest rates, growth remains a dream

By James Anyanzwa

Achieving the projected 10 per cent growth under Vision 2030 could be derailed by high costs of development capital, Prime Minister Raila Odinga has said.

Raila said the cost of raising funds for long-term investment has become a major challenge to the Government.

"I believe not many Kenyan businesses can afford interest rates of nearly 20 per cent. It would be difficult to achieve 10 per cent economic growth as targeted in vision 2030, if interest rates remain at this level," he said.

The PM was speaking at the Nairobi Stock Exchange at an occasion to mark the listing of KenGen Bond on Monday.

"This KenGen bond issue points to one of the major challenges we face — the cost of raising funds for long-term investment," he said.

"We need very large amounts of financial resources at reasonable costs to build our infrastructure to world class standards."

The KenGen Bond yields a return of 12.5 per cent per annum, free of income taxes. This is equivalent to an interest rate of 18 to 19 per cent for ordinary loans, which require payment of taxes.

Electricity tariffs

He challenged the power producer to substantially increase generation capacity at lower costs to offer electricity to end-users at more affordable prices.

He said Kenyan industries cannot be competitive in the international market, if electricity tariffs remain high.

"Interest KenGen pays on its debt should not lead to higher tariffs."

He said the Government has raised more than $700 million (Sh52.5 billion) for Olkaria 1 & IV from bilateral and multilateral agencies at concessional interest rates.

Raila was, however, optimistic that the second issue of KenGen bond would attract lower costs.

Mrs Stella Kilonzo, the Capital Markets Authority Chief Executive said the success of the KenGen bond issue and its listing, is a milestone in the development of corporate bond segment of the capital markets.

 

 

Read all about: Vision 2030 the Nairobi Stock Exchange KenGen NSE Capital Markets Authority

 

 

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