Treasury eyes second Eurobond

Kenya will return to international capital markets to borrow funds when it feels the time is right, Finance Minister Henry Rotich said on Tuesday.

Higher borrowing by Kenya to fund a range of infrastructure projects like roads, was justified, a senior IMF official told Reuters in an interview.

The East African nation set a budget deficit of Sh691 billion ($6.82 billion), 9.3 percent of GDP, for its fiscal year starting last July and it plans to borrow Sh150 billion exterof that from external commercial sources.

“We are monitoring. We will enter at an appropriate time to supplement the financing for this financial year and in the medium term,” Rotich told a news conference, held jointly with officials from the International Monetary Fund (IMF).

Abebe Selassie, the director of the African Department at the IMF, said it was important for Kenya to stick to the government’s fiscal consolidation plan in the medium term.

Rotich, whose full title is the Cabinet Secretary for The National Treasury, did not say what form the international borrowing will take, saying there were options of international bonds or syndicated loans.

Officials have held a series of “non-deal” roadshows in Britain and the U.S. this year and a source at the Treasury told Reuters potential investors had shown considerable interest in a second Kenyan issue.

“The yields are favourable. We know that investors are eager to continue investing in Kenya,” Rotich said.

Kenya issued its debut Eurobond in 2014, borrowing a total of $2.75 billion in an initial issue and a subsequent tap sale. It has said it was considering a second international debt issue and has not ruled out the Eurobond route.

Last week, opposition leader Raila Odinga said any new Eurobond issue by Kenya could be classified as “odious debt”, saying the government had failed to account fully for the use of funds raised in a previous issue.

Odious debt is a term used for cash borrowed by nations and subsequently not used in beneficial projects.

Rotich said the government had a long term plan of boosting tax collections, to fund infrastructure projects without driving up debt, and also cutting out wasteful spending.