Kenya issues a fourth Eurobond

Kenya has once again tapped into the international credit market to raise $1 billion in a 12-year Eurobond. This marks the fourth sovereign debt to be floated by the country since 2014. The pricing of the Eurobond at 6.3% has raised questions about its competitiveness and the country's fiscal health. CEO of Callstreet Research and Analytics, George Bodo, shed some light on the pricing dynamics and investor confidence in a recent interview with CNBC Africa. Bodo highlighted that the pricing of the Eurobond is within the range of other African economies, with a slight premium due to global market dynamics and Kenya's recent fiscal challenges. He noted that Kenya has been running significant fiscal deficits, exacerbated by the COVID-19 pandemic. Despite the oversubscription of the Eurobond by $5.4 billion, Treasury stuck to their target of $1 billion, emphasizing the need for discipline in managing the country's debt. Bodo cautioned against leaving money on the table and stressed the importance of aligning borrowing with strategic objectives. He also pointed out that the high demand for Kenya's debt is driven by global investors engaging in yield chasing due to low interest rates in other markets. While some concerns have been raised about Kenya's debt management following past reports of unaccounted funds, Bodo emphasized that government debt is generally viewed as safe due to the taxpayer guarantee. Looking ahead, Bodo highlighted the importance of ensuring that borrowed funds are used for their intended purposes, particularly in productive sectors that can generate returns and contribute to economic growth. He pointed to the need for greater transparency and accountability in the use of borrowed funds, especially in light of past instances where debt was diverted to recurrent expenditures instead of infrastructure projects. Overall, the successful issuance of the Eurobond reflects investor confidence in Kenya's ability to meet its debt obligations, but also underscores the importance of prudent financial management and effective utilization of borrowed funds.