Treasury gets 300 proposals for Eurobond

The National Treasury has downplayed concerns over its ability to service the impending maturity of a $2 billion Eurobond loan saying it now has enough headroom

According to Treasury, it has even received over 300 proposals offering solutions on managing its debt adding that its public debt is sustainable.

“On the upcoming 2024 Eurobond, the government has received over 300 proposals offering various liability management solutions as it embarks on effective liability management in the next fiscal year,” said Treasury Secretary Njuguna Ndung’u.

Treasury had advertised for an expression of interest for lead managers of Eurobond holding banks to devise an effective path to resolve the 2024 Eurobond crisis.

Kenya two months ago delayed the salaries of civil servants in order to give priority to foreign lenders, sparking an outcry across the country at a time when the cost of living is high.

Dynamic debt anchor

The Treasury now says there is a pipeline funding deals coming from multilateral lenders including IMF and World Bank.

“In the meantime there is a planned pipeline of foreign currency loans from IMF, World Bank and syndicated loans that will positively impact market liquidity,” Treasury said.

The government says IMF top officials are interested in releasing even more funding to Kenya, especially long low interest loans.

“In addition, the IMF MD committed to increasing finance to Kenya by deploying long term concessional financing through the new resilience sustainability fund facility,” said the CS.

Ndung’u added that proposals that will see the implementation of a dynamic debt anchor that will provide signals when the debt breaches certain limits are in place.

Treasury PS Chris Kiptoo also said the government was scheduled to receive $3 billion last week for budgetary support, saying it will help to improve liquidity.

Meanwhile, due to increasing clearance of principal sums after the grace period expired, Kenya’s bilateral debt repayments for China-funded infrastructure projects have surged by almost half to a new record of Sh107.42 billion this fiscal year.

According to Njuguna Ndung’u of the Treasury Cabinet’s expenditure data, the amount paid back to Chinese lenders increased by 46.19 percent from Sh73.48 billion in the previous fiscal year.

This occurs four years after the repayment moratorium was lifted. Before the Ruto administration took office, the money was mostly sent to the lenders—Exim Bank of China and China Development Bank—in two batches totaling Sh58.89 billion in January and Sh48.53 billion in the first quarter of the current fiscal year.adding that it will open South Lochar Basin for Full Field Development.

“First Oil is expected three years after FID. All revenue from petroleum will be shared in accordance with section 58 of the Petroleum Act, 2019. The process will be undertaken in strict compliance with the Public Financial Management Act,” said Chirchir.

“It was not a commercial production. There was a deficit of this first oil exploration because we were doing to many experiments,” he said.

He went on: “We have been lucky to have an audit done by an independent firm, an independent auditor –Rosa Correa Associates of South Africa. We have a full audit report which confirms the total barrels which are 414, 777 for the two consignments with a revenue of $27million.”

He said that the cost associated with the end-to-end project, which covers the cost including storage, totaled to Sh7billion ($51million) and the delta revenue, which is a deficit, is Sh3.2billion ($23.7million).

“There was no profit oil. There was no excess funds to be shared in this Early Oil Project Scheme in line with the provision of the Act.”

However, Lomenen charged that: “This is the saddest news I have ever received that they have agreed that the crude oil was sold and it was exported to the United Kingdom, and after selling the crude oil of 414,000 barrel which is negative $23.7million. We are hearing this information for the first time. Why did they sell the crude oil if they knew it was not economically viable?”.

By offering additional units of existing bond issues, the government can tap into the existing demand from investors without having to rely solely on the outcome of a single auction.

Market analysts have expressed their support for the government’s move, highlighting the importance of minimizing potential market disruptions.

They believe that by reducing the size of bond issues, the government can mitigate the risk of failed auctions, which can have adverse effects on market confidence and interest rates.

The government’s decision is also seen as a prudent step to maintain stability in the bond market and ensure a steady flow of funds to finance various development projects and government expenditure.

It demonstrates a commitment to managing risks and adapting to changing market dynamics.

With the second tap sale scheduled for FXD1/2023/03, the government aims to capitalize on the positive investor sentiment and meet its fundraising targets.

By opting for tap sales and building on previous successes, the government aims to mitigate risks, ensure market stability, and maintain investor confidence in its bond offerings.