Debt-Hungry Rotich Now Begs For Commercial Banks Help

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The government is set to ask commercial banks to help her pay part of the Sh200 billion debt that falls due this year after Treasury opted against tapping the Eurobond market again.

Half of the amount could be disbursed as early as next month in the form of a syndicated loan that the Trade and Development and Standard banks are arranging on behalf of the government.

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“Kenya is seeking to use these funds to finance part of its expected maturities while another portion will go into funding development expenditure. This syndicate will also allow the government access to credit line for an additional $250 million (Sh25 billion) if it deems fit to tap into,” a source told Nation.

Kenya has at most 17 years to clear her compound debt that stands at almost Sh12 trillion, all factors remaining constant.

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The amount is way above Kenya’s Gross Domestic Product (GDP) estimated at Sh8.2 trillion, meaning the country’s net worth is in the negative.

Kenya is staring at a Sh78.7 billion maturity next month of a loan advanced to it by Stanchart, Standard, Citi and Rand Merchant banks in March 2017, at a rate of eight per cent according to Nation.

The government is expected to remit the principal of Sh81.6 billion and accumulated interest of Sh13 billion.

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Kenya had budgeted for external debt repayments of Sh250 billion for the 2018/19 financial year, and is facing large redemptions this year.

“Whereas debt redemptions are large in 2019, it is projected that over the medium term, the level of redemptions will decline,” Treasury said in the report.

In December, Treasury PS Kamau Thugge said the ministry had opened discussions with lenders to roll over the two-year Sh76 billion syndicate arranged by TDB in the current financial year and lengthen its maturity to make debt repayments more manageable.

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“We have paid lenders who wanted their funds. However, we have also agreed on a six-month extension worth majority of them. By April, depending on our debt maturing obligations, we will either get a syndicated loan or go back to the Eurobond market,” Mr Rotich said then.

Treasury planned to raise Sh280 billion in external debt before June to help plug the 2018/19 budget shortfall, even as it stares at more than Sh200 billion in maturities.

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Standard chartered bank chief economist, Razia khan says Kenya has an open window to raise new borrowings at the same time. 

Treasury is currently seeking advice from international commercial banks on a 250 billion shilling Eurobond that is to be issued before the end of the current financial year.

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