Economy
Kenya plans to facilitate a new syndicated loan of NIS 140 billion
Tuesday, July 18, 2023
Trade and Development Bank for Eastern and Southern Africa. photo | TDB
Kenya has embarked on a new campaign to raise funds through a syndicated loan, just days after closing a similar $500m (Ksh70.8bn) deal arranged by a consortium of banks.
documents that he sees The daily business It reveals that the government is looking to raise up to $1.0 billion (Sh141.5 billion) through the facility to be arranged by the Trade and Development Bank (TDB).
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In a change of course, the Treasury is exploring the use of the new syndicated loan credit insurance cover to boost the appetite of global commercial banks and increase their chances of success.
The insurance coverage comes on the back of a $100 million (Sh14.2 billion) ticket size reduction of the recently concluded syndication loan, on the heels of modest appetites shown by the banks.
TDB Bank will arrange a new loan in US Dollars for Kenya in the new financial year commencing 1st July 2023. The launch of the loan is expected within the next month (August 2023). The government is looking to cover the credit insurance for the loan in hopes of boosting the participation of commercial banks.
The new loan comes weeks after Kenya secured a Ksh70 billion syndicated loan from a consortium of lenders, including Citibank, Rand Merchant Bank, Standard Chartered and Standard Bank.
Syndicated loans have become the government’s preferred option due to the global hike in interest rates triggered by the US Federal Reserve which has made raising funds from the global debt market very costly for developing countries.
Kenya’s public debt reached Sh9.6 trillion at the end of April 2023 and President William Ruto’s government plans to borrow an additional Sh718 billion in the current fiscal year to bridge the budget deficit.
A source familiar with the planned release of The daily business Securing credit will go a long way in helping Kenya score the coveted appetite given the challenging macroeconomic environment the country is currently navigating.
“The appetite for the recently issued $500m facility was modest and the lenders’ caution in light of the prevailing macroeconomic situation in Kenya could make it difficult, but credit insurance could help. The government has been looking at commercial banks especially those that have invested in Kenya in the past.
Availability of a new syndicated loan means that the government is looking to complement the recently received concessional financing with commercial financing.
In May, the World Bank’s board approved a $1.0 billion disbursement to Kenya through the Development Policy Operations Window, while the conclusion of the IMF’s fifth review paved the way for an additional $410.0 million (NIS 58 billion) to be withdrawn under an ongoing programme. with the box.
The government also plans to return to global markets by issuing international bonds in the current fiscal year.
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This comes at a time when the government has intensified its efforts to mobilize commercial financing in the fiscal year 2023/24.
Earlier this month, senior treasury officials led by Principal Secretary, Chris Kipto, and Managing Director, Public-Private Partnership, Chris Kirigwa, met with senior bond investors in London and gave a presentation covering options being explored in light of June 2024 Eurobonds worth $2.0 billion. maturity.
“The options put forward by the Government of Kenya include full repayment with a multi-tranche bond; partial repurchase and partial repayment with a multi-tranche Eurobond; and part payment on a swap basis with a multi-tranche Eurobond. by the main ranking organizers.
In the current financial year, the government is facing a deficit of Sh720.0 billion as the government is looking to fund Sh586.0 billion from the domestic market while the rest will come from external sources.
The just-completed $500 million (NIS 70.8 billion) syndicated loan was offered in two tranches, a three-year note and a five-year note, with proceeds earmarked to fund developments approved by the National Assembly for the 2022/23 fiscal year. .
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