The release of a new Eurobond by Kenya is anticipated to alleviate worries regarding the country’s debt status, consequently improving the overall economic prospects.
Economic experts at Diamond Trust Bank say the country’s issuance of the $1.5 billion (KES 234 billion) Eurobond to buy back the inaugural $2 billion bond, is likely to have a positive impact on exchange rate, inflation and the level of government spending on debt and development.
DTB CEO Nassim Devji said: “Today, as an economy, we face uncertainties of radical proportions from pandemics to geo-political fluidity to climate extremes to radical policy changes, all with unprecedented economic and financial ramifications for governments, businesses and households.”
The National Treasury confirmed that the country successfully issued the new Eurobond with plans to buy back the inaugural one due on June 24.
The exchequer said the new loan is divided into three instalments, with a weight average life of six years, and is expected to mature in 2031.It is priced at 10.37 per cent, the highest rate an African state has ever offered.
DTB further signals that the Central Bank is anticipated to begin lowering interest rates by June. Kenyans can anticipate heightened government expenditure alongside a decrease in the government’s reliance on domestic borrowing. These developments are expected to lead to higher market liquidity and a decrease in lending rates.
“This will take time, there’s the residual effects of the exchange rate depreciation, we still expect to feel that over the next couple of months.”
“As things normalize, we do expect government in line with their fiscal consolidation plan or efforts to stabilize, did reverse some of the subsidies especially around fuel, and that could keep some pressure therein. But also we are subject to volatile energy markets.” reiterated Faith Atiti, Head of Research at DTB.
DTB also mentioned that the economy is expected to expand by over 5 percent, with the agricultural sector poised to drive this growth, contingent upon favourable weather conditions.
