Kenya launched its second infrastructure bond on Tuesday, inviting bids for Ksh 60 billion for funding projects in the FY 2022/23.
The seven-year amortised infrastructure bond is the second within the calendar year.
The sharp rise in interest rates witnessed throughout the global economy in 2022 led to the sovereign’s delayed access to international financial markets—in light of debt service obligations falling due (USD 2.00Bn 2024 Eurobond).
The underperformance of the domestic debt market and shortfalls in the fiscal outturn have seen the sovereign suffer liquidity constraints that culminated in significant pending bills.
As at 31st March 2023, the total outstanding bills amounted to Ksh 537.20Bn of which 85% is owed to State Corporations and 15% to Ministries/State Departments/other government entities respectively.
The pending bills include payments to contractors/ projects, suppliers, unremitted statutory and other deductions, pension arrears for Local Authorities Pension Trust, and others. With the majority being owed to contractors/projects and suppliers.
Already we have witnessed the government conduct two tap sales on a 3-year issue which has thus far attracted significant bidding due to the attractive interest rates (14.228%).
Global and domestic tightening of monetary policy has exerted significant pressure on the yield curve.
As a result, the state in its bid to plug the fiscal shortfalls and lengthen its debt maturity profile has issued the infrastructure bond.
Source NCBA Market Research
