Sh51 billion loan adds to Kenya’s debt burden

The Treasury has signed a Sh$500 million (Sh51.5 billion) long-term loan agreement with the African Export-Import Bank (Afreximbank) and the Trade and Development Bank (TDB), formerly PTA Bank, pushing Kenya further into debt.

The two-tranche syndicated loan deal was closed on Monday in Nairobi.

The loan, for which Afreximbank and TDB acted as joint mandated lead arrangers, is part of a three-facility $1.55 billion (Sh154.6 billion) package being arranged separately by the Treasury in the first quarter of 2017 to finance State spending.

The facility comprises two tranches of $200-million (Sh20.6 billion) 10-year amortising loan by TDB and a $300-million (Sh30.9 billion) five-year amortising loan provided in equal parts by Afreximbank and TDB.

The lenders said the two tranches will be syndicated to development finance institutions.

By providing five-and 10-year financing, Afreximbank and TDB, said they had set new tenor benchmarks for future borrowings by the government, noting the longer-tenors provide significant additional value to the government, which has been seeking to gradually replace its shorter-term liabilities with equally longer dated ones.

More ways than one

“This debt raising exercise stands out in more ways than one — as an achievement in the syndicated loan market, as a confirmation of investor confidence for Kenya and as a further step towards better facilitation of inter-African trade,” said Benedict Oramah, president of Afreximbank.

“Afreximbank’s support for the projects to be financed with the proceeds of this facility are consistent with the ‘Deliver’ pillar of our Intra-African African trade strategy, which aims to create enabling logistics infrastructure for efficient intra-regional trade.”

In December, TDB approved another $250 million (Sh25.7 billion) to the government.

Admassu Tadesse, president and chief executive of TDB, said the bank has played a key role in raising up to $750 million (Sh77.3 billion) for the Government of Kenya in this current financial year.

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