Bleak 2019 for taxpayers as Kenya begins repaying loans
This has not come as good news, especially at a time when activity on the Nairobi Securities Exchange has slumped, mostly because of foreign investors.
It downgraded the issuer rating of the Kenya government to B2 from B1 but assigned a stable outlook, implying that the probability of the government defaulting on its loan obligations is increasing and that new loans would draw a higher risk premium.
The IMF said there will be no more reviews for the programme that expired on September 14, 2018, after Kenya failed to meet some key conditions, leaving the economy exposed to shocks that erode forex reserves.
“While we have to acknowledge that Kenya currently doesn’t face a balance of payments crisis and has not since 2011 arguably, it’s never been about the money but rather the confidence the market, especially foreign investors, place on IMF involvement,” said Jibran Qureshi, an economist with Stanbic Bank Kenya.
Sources told The EastAfrican that corruption in Kenya’s public sector, where millions of dollar’ worth of public funds have found their way into individuals’ pockets, and the IMF’s move to suspend its two-year budgetary support programme to the country have sent the wrong signals to the international investors, increasing their risk perception of the country.
Going by the yields on the second Eurobond of $2 billion issued in February 2018, things do not look any better for the government this time, which is in dire need of resources to implement President Uhuru Kenyatta’s Big Four Agenda projects covering universal healthcare, affordable housing, food security and manufacturing.
The bonds are listed on the London Stock Exchange, with the 10-year one priced at a coupon rate of 7.25 per cent and the 30-year bond priced at a coupon rate of 8.25 per cent.
In the sub-Saharan region, Eurobond yields have also been on an upward trend, partly due to the rise of interest rates in the US and a stronger dollar.
Efforts to obtain comments from National Treasury Cabinet Secretary Henry Rotichproved futile as our calls went unanswered and he had not responded to text messages by the time of going to press.
Kenya’s public debt is currently valued at more than Ksh5 trillion ($50 billion), with loans from China accounting for over 68 per cent of total bilateral lending, meaning it is the country’s biggest bilateral lender.