Experts fault Treasury over external debt advisor search
The government is in the market for an international advisory firm to help the National Treasury improve the country’s commercial debt sustainability profile.
In the expression of interest, Treasury says this will involve conducting a liability management operation on some unspecified external syndicated commercial loans.
This is after it removed Eurobonds from its planned restructuring of external commercial loans.
Exclusion of the international sovereign bonds saw the exchequer cancel an earlier tender last week seeking for a sovereign debt advisory.
The ministry put up a new tender limiting the advisory services for restructuring of syndicated commercial loans raising concerns among experts.
“The proposed assignment is meant to provide liability management advisory services to the government of Kenya to conduct liability management operations on some external syndicated loans to improve the debt sustainability profile,” read the new tender notice published yesterday.
Treasury applied for, and received exemption from the Bretton Wood institutions to tap Eurobond issues, even as it enjoys concessional financing from both the International Monetary Fund (IMF) credit lines and the World Bank Development Policy Operations (DPO).
Out of the amount, Sh249.8 billion ($2.3 billion) Eurobond will go to project financing, while Sh543 billion ($5 billion) will be used to manage its debts, which includes the financing of the 2024 Eurobond and retiring its expensive syndicated loans. But most financial and economic experts reckon the move is ill- advised.
“Our problem is not lack of experts, but the will to implement what you are told by your own people,” said John Kirimi, the executive director, Sterling Capital Ltd, in reference to Treasury’s debt management unit headed by former Deputy Central Bank Governor Haron Sirima.
Unsustainable levels
He was appointed on June 5, 2018 to streamline a grossly understaffed Independent Public Debt Management Office (PDMO), which has been blamed for plunging the country’s debt to unsustainable levels.
It is estimated Kenya faces $2.6 billion (Sh280 billion) in sovereign external debt servicing in 2021 and $3.6 billion (Sh388 billion) in 2022.
Albert Onyango, a finance expert said the National Treasury’s move was part of a strategy to blind Kenyans into believing the government is genuinely interested in changing the maturity profile of its debts.
“Its a fraud,” he said, adding: “ The world over, it is known that long debted loans with long grace periods are desirable.”
Onyango said room for loan restructuring is too tight because the country has overborrowed, and is on the verge of defaulting.
In an earlier interview, Samuel Nyandemo, senior lecturer, Economics at the University of Nairobi said Kenya was living beyond its means., with the borrowing having surpassed its national wealth, a prospect he said was not good for business.
The IMF recommends that the ratio of public debt to gross domestic product should not be higher than 40 per cent, with the country’s current debt standing at Sh7.6 trillion.
Kenya Revenue Authority has been straining to raise revenue, with collection projected at Sh2 trillion, trailing the fiscal budget at Sh3 trillion.
