Thread by @mmnjug

Kenya will take new loans to repay the Eurobond when they fall due as part of its debt management strategy to reduce pressure on principal repayments. - @NationAfrica

.@KeTreasury has a solid plan to deal with Eurobond loans, which started maturing last year, all the way to 2024.

This means that Kenya will be back in the international markets soon, seeking new loans to repay the old ones, in what will see the loan refinanced in perpetuity, with the taxpayer only paying the interest.

Rolling over is a debt strategy where instead of repaying the principal of a loan when it falls due, a country decides to enter into a new agreement with the lender to give it a new loan to repay the first debt.

Though it is a preferred mode of refinancing debt worldwide, it comes with a roll over risk where the new loan can come at a higher rate thereby forcing the borrower to pay more in interest repayments.

Kenya went for its first Eurobond in June 2014 where a total of Sh280B was borrowed in five and 10-year tranches.

GoK went back for another Eurobond in 2018 year where it netted Sh202B in 10 and 30-year tranches.

In 2019, Kenya was back at the international markets where it raised its Sh210B in its third Eurobond named the #Kachumbaribond, that also repaid other loans and fund unspecified infrastructure projects.

The loan was issued in a dual tranche, one maturing in seven years and the other after 12 years. In total, the country has raised about Sh692B in Eurobonds alone, which started maturing last year all the way to 2024.

CS Yatani has moved to calm fears that Kenya is headed to a debt crisis, given that it is planning to seek another parliamentary approval to increase the debt ceiling above Sh9 trillion to support its borrowing spree.

Treasury is also exploring various alternative financing options such as private placement, diaspora bonds, Islamic bonds (Sukuk), and issuance of sovereign green bonds over the medium term to finance climate friendly public projects.

By the end of December 2020, Kenya's debt had grown to Sh7.2T, which is equivalent to 65.6% of the GDP. Total external debt was Sh3.7T while the domestic debt was Sh3.4T.

The Public Finance Management Act, 2012 sets the statutory debt ceiling at Sh9T. At the current borrowing pace of about Sh1T per year, this ceiling is going to be hit before the end of the next financial year.

MAZEMATICS: A new loan and or Eurobond to help pay the old Eurobond bit.ly/3ulLUw6