Government to borrow Ksh.1.5T in loans

BySacco Review

May 5, 2021

By Malachi Motano

The Government is set to borrow at least Ksh.1.5 trillion in the new financial year which will commence in

According to final budget estimates tabled in Parliament last week, the new borrowing plan matches up to estimated loan financing in the current financial year running to June 30- Ksh.1.456 trillion.

It had only expected to raise Ksh.2.038 trillion in revenues leaving a financing hole of Ksh.1.594 trillion, out of its original Ksh.3.6 trillion spending plan,

Ksh.62 billion of the deficit is expected to be funded by grants from development partners leaving behind a gap still in excess of Ksh.1.5 trillion.

The government, according to the new Treasury documents,  will borrow Ksh.952.9 billion to finance expenditures unmatched by revenues which largely comprise of development projects.

The net foreign financing is tabulated at Ksh.291.3 billion and comprises of a Ksh.124.3 billion Eurobond and Ksh.74.3 billion from the World Bank Development Policy Operations (DPO).

Some other flows expected from external financing include Ksh.57.6 billion in disbursements from the International Monetary Fund agreed Ksh.255 billion loan program announced in April.

Meanwhile Net local borrowing is estimated at Ksh.661.6 billion with the new loans representing proceeds from the issuance of Treasury bills and bonds to a largely local investor base.

Other than net financing, the country is expected to borrow Ksh.579 billion to settle maturing loans with local redemption representing the bulk of expected principal payments at Ksh.316.6 billion.

External principal loan repayments are meanwhile pegged at Ksh.262.4 billion.

Total borrowing in the 12 month period stretching from July 2021 to June 2022 could meanwhile be much higher should Kenya take Ksh.351 billion, likely in the form of new Eurobond debt, to refinance part of its external commercial loans.

Last week, the National Treasury ruled out the restructure of Eurobonds implying it will likely seek to redeem upcoming payments on syndicated loans.

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