Central Bank
Henry Rotich
II
Kamau Thugge
Kenya
MPC
Rotich
Thugge
Treasury

Central Bank receives Sh165bn Eurobond cash

Treasury principal secretary Kamau Thugge said Monday that $1.632 billion had been sold to the central bank and the equivalent (Sh165.3 billion) credited into the Exchequer account in readiness for disbursement to intended projects. Attention now turns to Treasury secretary Henry Rotich, who is expected to offer the finer details of how the Eurobond cash will be disbursed to various ministries and government agencies. Observers will be particularly keen to see whether all of the money will go to development financing as planned, or whether some of it will find its way into recurrent expenditure.

The Treasury has called in the proceeds of a recent Eurobond issue in a move that has significantly boosted foreign exchange reserves at the Central Bank of Kenya (CBK) and paved the way for spending of the cash to begin.

Treasury principal secretary Kamau Thugge said Monday that $1.632 billion had been sold to the central bank and the equivalent (Sh165.3 billion) credited into the Exchequer account in readiness for disbursement to intended projects. Kenya last month issued a $2 billion (Sh202 billion) Eurobond and has since used $366.2 million (Sh37 billion) to settle part of syndicated loans that were due for payment. Kenya’s foreign exchange reserves rose by $1.68 billion (Sh169.8 billion) in the past week to an all-time high of $8.83 billion (Sh894.6 billion), largely due to the dollar purchase from Treasury.“We sold the sovereign bond dollar proceeds to the CBK and they gave the Treasury the shilling equivalent, the same process we followed last time (in 2014). The contribution to CBK’s international reserves was $1.632 billion after netting off some syndicated loans for $366.2 million,” Dr Thugge said.

Relief for borrowers as MPC cuts the cost of loans

Attention now turns to Treasury secretary Henry Rotich, who is expected to offer the finer details of how the Eurobond cash will be disbursed to various ministries and government agencies.Observers will be particularly keen to see whether all of the money will go to development financing as planned, or whether some of it will find its way into recurrent expenditure.Mr Rotich had, when responding to questions following his return from the Eurobond roadshow, stated that proceeds of the bond would go to financing the budget deficit and refinancing some of the syndicated loans. Dr Thugge’s revelation of how the cash has been handled so far eases concerns that the bulk of the funds would be spent in retiring syndicated loans.Some of the banks that lent Kenya $1.65 billion (Sh167 billion) had held the option of calling in the debt early once the sovereign bond was issued. The decision to call in the proceeds of Eurobond II should therefore offer the government some relief in its effort to finance the budget, coming at a time when revenue collection is trailing targets.In the six months to December 2017, the Treasury had Sh84 billion revenue shortfall that forced Mr Rotich to propose a Sh78 billion cut in allocation to the national and county governments as part of austerity measures meant to minimise the deficit. The CBK said in its monetary policy committee statement yesterday that the dollars it has added to its reserves will provide additional cover for the shilling against exchange rate shocks.“The CBK foreign exchange reserves are at an all-time high of $8.832 billion (5.9 months of import cover), up from $7.089 billion (4.7 months of import cover) in January 2018, and continue to provide an adequate buffer against short term shocks in the foreign exchange market,” said CBK in the MPC release.

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