Government raises Sh200 billion Eurobond
SEE ALSO :Kenya’s borrowing costly, experts warnLast week, credit ratings agency Moody’s downgraded Kenya’s debt rating to B2 from B1 while officials were in the middle of the bond roadshow abroad, angering the government. Ratings agency Moodys downgraded Kenya’s credit ratings for both local and foreign loans arguing that debt is growing faster than the Gross Development Product (GDP) and that new loans used to pay old debts are becoming expensive. “On 08 February 2018, a rating committee was called to discuss the rating of the Kenya Government. The main points raised during the discussion were: The issuer's fiscal or financial strength, including its debt profile, has materially decreased. The issuer has become increasingly susceptible to event risks,” Moodys said. More bad news emerged on Tuesday, after the International Monetary Fund said it had frozen Kenya’s access to a Sh150 billion standby facility last June, after failure to agree on fiscal consolidation and delay in completing a review. “They (the government) were able to weather the knocks of the Moody’s downgrade and the IMF issue,” said Aly Khan Satchu, a Nairobi-based independent trader and analyst.
SEE ALSO :Eurobond money 'earned, but no project'But he warned that the government needed to convince investors it has a plan to tackle the fiscal deficit. “People are worried about debt-to-GDP ratios and they want to see a stronger language about how this will be addressed,” he said. Kenya’s total debt is about 50 percent of GDP, up from 42 percent in 2013. It has borrowed locally and abroad to build infrastructure like a new railway line from Nairobi to the port of Mombasa. The finance ministry has published a plan to lower its fiscal deficit to 7 percent of GDP at the end of this fiscal year in June, from 8.9 percent in 2016/17, and to less than 5 percent in three years’ time. Satchu said it was not enough for investors. They want to see more targeted infrastructure investments that will ensure a return, and attempts to reign in a ballooning public service wage bill and other recurrent expenditure.
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