Kenya is weighed down by swelling public debt and faces the possibility of a debt crisis (where the government can’t repay what it owes).
Kenya’s current public debt stands at approximately 4.884 trillion Kenyan shillings (USD$49 billion) or 56.4% of the country’s gross domestic product.. This is up from 42.8% in 2008. In other words, the country owes more than half the value of its economic output (GDP).
The vicious cycle I have alluded to. Borrowing $ when you are not earning enough $
— maina (@mainat) November 30, 2018
Eve though ,Kenya has approached the Trade and Development Bank for a syndicated loan to pay off five-year Eurobonds maturing in 2019, according to a person familiar with the arrangement.
A syndicated loan, also known as a syndicated bank facility, is a loan offered by a group of lenders – referred to as a syndicate – who work together to provide funds for a single borrower. The borrower could be a corporation, a large project or a sovereignty, such as a government.
The government is said to target between $800 million and $1 billion and seeks a tenor of at least seven years, the person said. Kenya’s $750 million of Eurobonds mature in June. Treasury Secretary Henry Rotich didn’t answer calls or text messages seeking comment. A TDB spokesman declined to comment, saying the bank would issue a statement later Friday.
Unlike Eurobonds, syndicated loans are considered easier and quicker to arrange because the government requires neither a prospectus nor a roadshow, and has no obligation to disclose the terms to the public.
President @UKenyatta ANAKOPA, WANAIBA. Sasa anakopa zingine alipe zile walikopa, wakaiba. Uhuru should atleast try and recover some of the money stolen before he goes on another begging trip. https://t.co/ZpzmRhNXqM
— Boniface Mwangi (@bonifacemwangi) November 30, 2018
For that convenience, the loans are usually more expensive. Kenya contracted a two-year $750 million syndicated loan in 2015 at an effective yield of 8 percent, according to International Monetary Fund data. In comparison, the nation’s five-year Eurobonds issued in 2014 were priced at 5.875 percent and traded at 6.035 percent by 12:30 p.m. in Nairobi, the capital.
The TDB arranged five of nine syndicated loans to East Africa’s biggest economy since 2015, according to disclosures made in a Eurobond prospectus in February.
The Treasury intends to raise 280 billion shillings ($2.73 billion) in external borrowing to finance its 2018-19 budget by issuing Eurobonds, a syndicated loan or green bonds.
Focus on Kenyan debt has intensified since it more than doubled in the past six years to 5.15 trillion shillings. The IMF, which warns the borrowing has raised fiscal vulnerabilities and increased interest payments, revised last month Kenya’s risk of debt distress to moderate from low
Rotich is running the national treasury the same way hustlers do with mobile lending apps. Borrow from Mshwari to repay a Tala loan.
You’re broke if you got to borrow to settle loans that are due.— Mike Musa (@MuhangaMike) November 30, 2018