SECTIONS

State seeks to raise Sh75 billion for infrastructure

The apex bank said interest rate will be market-determined. [File, Standard]

The government has floated a Sh75 billion bond to finance the construction of roads, rail and other mega infrastructure projects in the current financial year.

In a prospectus, the Central Bank of Kenya (CBK), the fiscal agent for the government, announced a 19-year amortised bond that will be on sale between January 31 and February 15.

The cash raised will be used to fund infrastructure projects in the current financial year ending June 2022, mostly the completion of the numerous projects that are underway.

"The bond will be tax-free as is the case for infrastructure bonds as provided under the Income Tax Act,” said CBK.

The apex bank said the interest rate will be market-determined.

Being an amortised bond, its principal (face value) will be paid down regularly along with its interest expense over the life of the bond, an attraction compared to a bullet bond which is paid at maturity.

Infrastructure bonds also tend to attract more foreign investors, a development that could help boost a weakening Shilling.

It is the second time that the government is flouting an infrastructure bond this financial year. In September last year, the State went to the market seeking to borrow another Sh75 billion and received offers amounting to Sh151.3 billion.

Treasury in its budget documents for the 2021/22 financial year said it would scale up the development of critical infrastructure such as roads, rail, energy and water to achieve a resilient and sustainable economic recovery.

This would then reduce the cost of doing business, ease the movement of people and goods as well as promote competitiveness.

Mega infrastructure has been supporting the economy as most sectors took a beating from Covid-19.