Government postpones plans to debut Sh45 billion euro bond

By Kevin Mwanza

Kenya expects to seal a $600 million (Sh54 billion) short-term loan by mid-January, and has postponed a planned euro bond to the next fiscal year (July-June 2012/13), the finance ministry said on Wednesday.

Joseph Kinyua, Permanent Secretary in the Finance ministry, told reporters that the Government had approached about 14 international banks, and expected to settle for a maximum of three for the short-term loan. "We may be able to conclude with either one or three. We are expecting the process will be complete by mid January," Kinyua said. "Plans for the sovereign bond could be revived in the next fiscal year."

Kinyua said the country had postponed plans to issue a debut $500 million (Sh45 billion) euro bond in the current fiscal year because it could take too long to materialise, adding that the yield on the short-term loan will be the same as the bond.

"The intention by the Government to borrow $600 million is part of what we had planned for the sovereign bond. But we’re afraid the sovereign bond could take too long," Kinyua said.

"By that time, we would be signing about 40 per cent of the financing. The rest of the amount will be given by the end of the fiscal year."

Cabinet gave the Treasury the go ahead on Tuesday for the short-term external loan to finance infrastructure projects.

He said the Government did not want to raise money locally since it would worsen funding pressure in a domestic market that has seen interest rates soar this year.

Interest rates have jumped in the final quarter of the year. The Central Bank of Kenya has raised its key-lending rate by a total of 11 percentage points since October to 18 per cent. — Reuters