Kenya postpones Eurobond issue plan

Kenya has postponed plans to issue a debut eurobond in the fiscal year to June 2012 and will instead raise $600 million from international banks to seek more favourable interest rates, a senior Treasury official said on Tuesday.

"We've shelved the sovereign bond for now. We're looking for $600 million from international banks," Joseph Kinyua, permanent secretary in the finance ministry, told a news conference.

"If we're able to get money from outside at cheaper rates than we have from local banks, it will help ease the funding pressure," Kinyua said, adding that they would advertise for bids soon, without giving more details.

Only two weeks ago Finance Minister Uhuru Kenyatta had said Kenya was "definitely going ahead" with the eurobond.

Some analysts were not convinced Kenya would get a better rate by going to commercial banks. They said it was possible Kenya had concerns investor demand for a eurobond might be weak ahead of general elections next year, and that weak appetite would reflect negatively on Kenya's image as a sound investment destination.

They added that there might be pressure from commercial banks for any loan to be publicly guaranteed.

Interest rates in Kenya, East Africa's biggest economy, have jumped in the final quarter of the year. The Central Bank of Kenya has raised its key lending rate by a total of 11 percentage points since October to 18 percent.

Credits: Kevin Mwanza/Reuters Africa

 

This article was originally posted on Sustainable Development Africa Platform

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