The government is planning for another multi-billion Eurobond. The new Sh. 250 billion Eurobond will be used to plug holes in the 2018/19 budget.
Treasury PS Kamau Thugge told Bloomberg news service yesterday that the country will issue $2.5 billion (Sh. 250 billion) Eurobond and raise another $370 million (Sh. 37 billion) in syndicated loans to help cover the budget shortfall of Sh. 622 billion.
The government expects to raise Sh. 46 billion from grants with the remaining balance of Sh. 576 billion being raised through both external and domestic borrowing — including the Eurobond and syndicated loans.
News of a third Eurobond issue comes just eight months after the government raised Sh. 202 billion via a sovereign bond which was largely used to retire a syndicated loan of Sh. 101 billion from a consortium of banks last year.
The bond was issued in February in two equal tranches of 10 and 30 years for an annual interest rate of 7.25 per cent and 8.25 per cent respectively. They are expected to mature in 2028 and 2048.
In 2014, Kenya floated the first Eurobond of Sh. 280 billion in two tranches of five and 10 years. It is expected to pay the first tranche of Sh. 97.71 billion before end of June next year.
Details of how proceeds of the first controversial Eurobond were used remain scanty.
While Treasury said that amount was used to finance infrastructural projects in the country, former Prime Minister Raila Odinga insisted the money was squandered by corrupt public officers.
The government last week slashed revenue collection targets for financial years up to 2021/2022 but raised the debt portfolio for the period.
For instance, it cut this year’s revenue projection by Sh. 96 billion (from Sh. 1.949 trillion to Sh. 1.853 trillion) but raised public debt margin from Sh. 4.82 trillion to Sh. 5.09 trillion.
It also revised revenue targets for 2019/2020 downward by Sh. 42 billion to Sh. 2.074 trillion while that of 2020/2021 was slashed by Sh. 42 billion to Sh. 2.38 trillion. It is targeting to raise Sh. 2.73 trillion in revenues in 2021/222.
Public debt on the other hand is expected to grow from the projected Sh. 5.097 trillion this year to Sh. 5.977 trillion by the end of President Uhuru Kenyatta’s term.
The National Treasury attributed the downward revision in revenue targets to amendments to revenue raising measures in the recently enacted Finance Act 2018, which resulted in the reduction of projected revenues by Sh. 48.6 billion.
“To remedy these deviations, revenue projections for 2018/19 have been revised taking into account a revenue shortfall of Sh. 172.4 billion last year, lower revenue in the first two months of the current financial year, and amendments to the Finance Bill,” the Treasury said.
Kenya Revenue Authority will now have to collect Sh. 1.673 trillion down from a target of Sh. 1.768 trillion assigned during the national budget reading for 2018/19 in June.