If for a moment you thought that the government is going to relent on borrowing to allow the mwananchi to clear the current debt, then its not happening anytime soon.
If you can remember very well, President Uhuru Kenyatta in the late Peter Musyoka burial, Kalonzo’s father, he stated clearly that the country won’t stop borrowing despite the public out cry.
This is now evident as the Treasury is looking to accelerate domestic borrowing with the Sh50 billion infrastructure bond, the largest such offering since this type of bond was first floated in 2009.
Central Bank of Kenya (CBK) says that the 20-year paper will carry a coupon of 11.9 per cent, with a sale window of only two days (yesterday and today) indicating that they anticipate high demand from investors.
Unlike other securities, infrastructure bonds are tax-free, making them more attractive to investors — including foreign buyers.
“The purpose of the bond is for partial funding of infrastructure projects in roads, water and energy sectors. The bond will be tax-free as is the case for all Infrastructure Bonds as provided for under the Income Tax Act,” said CBK in the bond prospectus.
The sale comes during a period of high liquidity in the money market, as shown by the interbank rate, which is currently at 2.9 percent, from six percent just over a month ago.
The last infrastructure bond was floated in January seeking Sh40 billion in a 15-year paper. Although the offer received bids worth Sh55 billion, the CBK opted to take only Sh5 billion rejecting expensive bids, before returning with a tap sale to mop up the balance.