Ruto seeking KSh76.8bn loan from FOUR international banks
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Ruto seeking a KSh76.8bn loan from four international banks to fill the 2022/23 budget deficit
Ruto seeking a KSh76.8bn loan from four international banks to fill the 2022/23 budget deficit.
To close the budget deficit in 2022–2023, the National Treasury has approached four foreign banks to set up a KSh76.8 billion syndicated loan.
The Central Bank of Kenya is anticipated to receive the $600 million loan “in the coming weeks,” according to sources familiar with the deal.
According to reports, CitiGroup, Rand Merchant Bank, Standard Chartered Bank, and Standard Bank are the lead transaction advisors for the credit facility that is also expected to shore up CBK’s dwindling foreign currency reserves.
According to sources familiar with the proposed syndicated loan, the government intends to raise the money in two installments, one with a three-year maturity and the other with a five-year maturity.
“Short- to medium-term offerings is the most viable option for both the government of Kenya and the creditors,” said one of the sources on the ongoing transaction.
President William Ruto has repeatedly cited public debt as the biggest challenge facing his new administration while castigating his predecessor Uhuru Kenyatta for borrowing expensive, commercial loans from external lenders.
The last syndicated loan Kenya borrowed was a $300 million facility (Sh38.4 billion as per the current exchange rate) raised just before the August 2022 General Election, in an arrangement led by the Trade Development Bank.
“As we speak today, 65 percent of all the taxes we collect, we use to pay debt… we cannot continue to borrow from others. If we must borrow, let us borrow from our own savings so that we can pay interest to our own savers,” said President Ruto on September 25, barely two weeks after being sworn into office.
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In its latest meeting held this week, the Cabinet approved a decision to abandon the country’s Sh10 trillion debt ceiling in favour of a floating target of 55 percent of Gross Domestic Product.
The National Treasury, through Supplementary Budget I 2022/23, has proposed to recalibrate borrowing in the current financial year with a bias for more externally-sourced financing.
It plans to slash domestic borrowing for the current financial year from Sh581.7 billion to Sh415.5 billion and increase external borrowing from Sh280.7 billion to Sh378.9 billion.
The total portfolio of public debt is currently slightly skewed in favour of domestic borrowing.
External loans represented 49.8 percent of total debt at the end of October 2022, while the proportion of domestic debt made up 50.2 percent, a five-year high.
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