Kenya’s borrowing spree is set to go a notch higher. This is after it emerged that the government is set to take up a new Sh. 300 billion international loan.
This means the country could be headed for a third round of borrowing through issuance of a Eurobond under the planned commercial debt-financed deficit worth Sh. 300 billion.
An alternative to raising the funds under commercial financing terms would be through syndicated loans, but they are more costly, hence less desirable unless in addressing emergency distress.
The other half of the budget hole worth Sh600 billion is to be plugged through donor support, concessional debt granted by friendly nations, and project loans such as the type issued by China.
It would be the third issue of a Eurobond, also known as sovereign bond, after the two previous issues of June 2014 and February 2018, highlighting growing dependence on debt for survival.
Budget estimates tabled in the National Assembly yesterday contained the approved spending and financing plans for the financial year that starts July 1.
“The Government will continue to diversify the sources of financial resources over the medium term by maintaining a presence in the international capital markets,” read a summarised report of the national budget.
In the 2014 debt issue, the government raised slightly over Sh. 275 billion – against a target of Sh. 200 billion, with the expenditure of the proceeds kicking up a nationwide storm over possible embezzlement.
A portion of the debt worth Sh. 75 billion is repayable by June next year, a significant amount considering that some crucial expenditures have been shelved because the Government is broke. Sh. 78 billion is budgeted for the repayment, plus Sh. 19.5 billion in interest annually since issuance.
Following the planned repayment of the first portion, the interest of the Eurobond will fall to Sh. 15.2 billion.