banking & finance

Kenya Said to Be Near $800 Million Citibank, StanChart Loan

Tuesday, 21 Feb 2017

Kenya is close to signing an $800 million syndicated loan with four banks to help fund infrastructure projects and support the shilling, according to a person familiar with the matter.

East Africaís biggest economy is expected to sign the three-year facility with Citigroup Inc., Standard Bank Group Ltd., Standard Chartered Plc and Rand Merchant Bank by Tuesday, the person said, declining to be identified because he isnít authorized to speak on the matter. Kamau Thugge, the Treasuryís principal secretary, didnít answer calls and text messages seeking comment.

The government also secured $500 million from lenders led by the Trade and Development Bank, an East African trade-finance bank based in Burundi, the person said. The 10-year loan is in addition to the $250 million it raised from the same lenders last month.

The loans come as the nation faces debt repayments of about $8 billion this year, including interest, according to data compiled by Bloomberg. Kenya, which hasnít ruled out a Eurobond sale, may borrow as much as 250 billion shillings ($2.4 billion) externally in the fiscal year that begins on July 1, the person said. Thatís more than the 206 billion shillings the government said it will raise in budget estimates submitted to parliament last week.

Spokesmen for both Citigroup and Standard Bank referred questions to the Kenyan Treasury. Standard Chartered and RMB declined to comment.

Kenya plans to raise 154 billion shillings through external borrowing in the current budget year that ends June 30, to finance a deficit estimated by the Treasury at 9.6 percent of gross domestic product.

Increased Expenditure
Kenya will probably prefer a single placement in the coming 2017-18 fiscal year and sees Eurobonds as a cheaper option, the person said. A second issue, after the nation raised $2.82 billion in debut sales in 2014, is still under consideration, although the government remains sensitive to the timing.

The state may increase spending to 2.29 trillion shillings in 2017-18 from 2.23 trillion shillings in 2016-17, according to Treasury estimates. Expenditure may expand to as much as 2.6 trillion in the fiscal year starting July, according to the presidency.

Kenya may struggle to reign in spending ahead of elections in August and a widening deficit could "pose a key threat to an otherwise positive" macro-economic outlook, BMI Research, a unit of Fitch Ratings, said in an e-mailed note. The ballot and worsening drought conditions will probably result in the "governmentís fiscal position remaining under pressure over the coming quarters," it said.

Credits: Felix Njini/Bloomberg