CBK halts borrowing of foreign currency from listed firms

Listed firms were blocked by the Central Bank from issuing foreign currency debt over concerns of the stability of the shilling.

Top capital markets official said the regulator had expressed concerns over spikes in dollar demand when debts are repaid.

Currency matters are sensitive given that more than half of Kenya's debt is in foreign cash. Any volatile movements can spike the units of shillings needed to repay every dollar we have borrowed from abroad.

Point of redemption

Central Bank did not also have an accommodative National Payment System to settle multi-currency payments.

“This is the second time we are trying to introduce this. The regulator was concerned to say one issues a Sh20 billion note and investors have to go to the market to get the dollar, the shilling will weaken, the same at the point of redemption,” said Capital Markets Authority Head of Strategy and Policy Jairus Muaka.

He spoke in Nairobi yesterday on the sidelines of a policy round-table meeting by market players to draft proposals to improve the Kenyan Capital Market effectiveness.

Mr Mwaka observed that the settlement system forced traders to convert foreign currencies to the shilling first. "To change a dollar to Euro, one must first change it to Kenyan shilling before conversion to other currencies since the settlement system was built around the shilling.

He said CBK asked for more time to analyse and adjust the payment system to cater for various currencies.

Market players want Treasury to allow securities issuance and trading to be in various currencies other than the shilling.

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Listed firmsCentral BankCurrencyForeign Currency DebtCapital Market effectiveness.CBKCentral Bank of Kenya