State eyes Diaspora dollars in planned bond issue
- The government is looking to tap on the record remittances to mobilize revenue for its Medium Term III plan by issuing a bond specifically targeted at the Diaspora Population.
- Diaspora remittances grew to breach Ksh. 274 billion in 12 months to December 31, 2018 backed by the extension of a tax amnesty for monies stashed abroad by the National Treasury under amendments to the 2018 Finance Bill.
The Kenyan government has set its sights on the growing remittances from the Kenyan Diaspora community, announcing plans to issue a bond targeted specifically at external faction.
Deciphering the proposal Friday, Capital Markets Authority Director of Regulation, Policy and Strategy Luke Ombara said the capital market’s regulator had engaged the Diaspora population as late as December 23 2018 alongside Treasury, this in a view to respond to the community’s demand of a government investment vehicle.
“We have engagements through the association of the Diaspora citizenry. Their concerns have been on what the capital markets have for them as most of what they send goes towards consumption and to a very large extent- real estate,” he said.
Mr Ombara is hoping to lure the Diaspora community through a tax free-interest payout over the bond yield.
“A lot of focus is on the medium term plan III and infrastructure projects. We are aware that any proceeds of a bond with tenure greater than three years applied towards infrastructure finance is exempted from withholding tax. This is our selling point, Mr. Ombara added.
Inflows from the Kenyan Diaspora population grew to transcend expectations by breaching the Ksh. 274 billion mark at the close of 2018, to represent a 39 percent growth in remittances from the Ksh. 198 billion recorded in 2017 according to data compiled by the Central Bank of Kenya (CBK).
The North American continent accounted for 45 percent of all remittances ahead of Europe at 32 percent. The remittances have grown to rival exports as the traditional channels for Kenyan Forex exchange earnings.
The recorded remittances in 2018 for instance beat the combined total earnings of tea and cut flowers at Ksh. 169 billion across the 12 months.
The notable gains in remittances are in part attributed to the extension of the tax amnesty for money stashed abroad by the National Treasury as part of amendments to the 2018 Finance Bill.
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