Kenya has begun shopping for $1 billion loan through a syndicated outlets – three commercial lenders – being arranged by the Trade and Development Bank and Standard Bank.
The government plans to use the funds to finance part of its maturing debt and its development expenditure.
The loan is being sought over the next one month amid warnings to the government to go slow on contracting new debt and pressure rising to settle credit maturing in the first half of the year.
The news of the move by the National Treasury to seek new funds came as Cabinet Secretary, Henry Rotich, acknowledged the need to cut back on foreign loans to ease repayment concerns.
The Treasury, in its 2019 Medium Term Debt Management Strategy (MTDS), said that there will be a cap on commercial loans at four per cent of the total external debt.
It further proposed gross external debt financing of 38 per cent against 62 per cent gross domestic financing.
“On the external debt, concessional is proposed at 26 per cent, semi-concessional eight per cent and commercial four per cent,” the Treasury said.
The lower proposal for commercial loans is an indicator that Mr Rotich is under pressure to reduce the appetite for sovereign and syndicated loans, which have topped external borrowing in the past five years.
Nairobi is expected to settle a $816 million debt with an accumulated interest of $130 million next month, being a commercial loan from Stanchart Bank, Standard Bank, Citi and Rand Merchant Bank procured in March 2017, at an interest rate of eight percent.
For the new loan, the TDB, (formerly PTA Bank), reached out to several financial institutions to participate in the syndicate, and closed the tender on February 13. TDB president Admassu Tadesse confirmed their role as lead co-arrangers, saying that they plan to raise the cash by April.