Offers for $350m infrastructure bond back on the table

The quick return to market underlines the governments need for debt.

A second bridge is planned to ease the motor vehicle congestion over the current Nyali bridge in Mombasa. Such a project will require substantial funding. FILE PHOTO | NATION 

IN SUMMARY

  • The Treasury hoped to raise Ksh35 billion ($350 million) in the tap sale which closed on Friday.
  • The government rejected the bulk of cash taking in Ksh5 billion ($50 million) priced at an average 12.5 per cent.
  • Government is determined to keep the rates low not only to rein in the interest burden but also in fear of crowding out the productive private sector from the credit market.

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Kenya reopened the sale of its infrastructure bond after barely a week, hoping that investors will temper their pricing after it sent out a message that it was not willing to take expensive cash by rejecting Ksh50 billion ($500 million) in the first sale.

The Treasury hoped to raise Ksh35 billion ($350 million) in the tap sale which closed on Friday. In the first sale investors had offered Ksh55.7 billion ($557 million) at an average 13 per cent. 

The government rejected the bulk of cash taking in Ksh5 billion ($50 million) priced at an average 12.5 per cent.

“Given the low level of debt absorption, the Central Bank has announced a tap sale on the issue seeking to raise Ksh35 billion ($350 million) from the market.”

The quick return to market underlines the governments need for debt to complement the underperforming revenue collections.

The Treasury has increased its borrowing plans by Ksh68 billion ($680 million) following a Ksh52.6 billion ($526 million) shortfall in revenues in the first five months of the current financial year.

Domestic borrowing has been increased by Ksh18 billion ($180 million) which will see the government borrow Ksh293.8 billion ($2.9 billion) from the local market this year up from the budgeted Ksh275.6 billion ($2.7 billion).

The disclosure has seen investors lure the government into taking higher priced money.

Government is determined to keep the rates low not only to rein in the interest burden but also in fear of crowding out the productive private sector from the credit market.

With interest rates capped at 14 per cent, a high borrowing rate by the government would see bankers, who are the biggest investors in treasury securities, offer their money to the state while pulling back from private investors who are perceived to be more risky.

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