Kenya is looking to receive up to Sh100 billion in syndicated loans by end of March as it moves to patch up the current financial year’s budget deficit ahead of the General Election, Treasury PS Kamau Thugge has said.
Delays in getting the syndicated loans have been attributed to a number of factors, among them the high cost of money in international markets.
Dr Thugge said the process could be finalised in the next two months.
“We are in the process of getting that additional funding and we should be able to receive it shortly before end of this financial year, hopefully by March,” he told the National Assembly’s Finance Committee yesterday.
Parliament approved provision for external borrowing of up to Sh153 billion in the year ending June 2017, which the Treasury tabled through the budget policy statement.
In December, banks submitted bids in response to Kenya’s call to raise about Sh800 million in internationally syndicated loans.
Early this month, the Treasury picked Standard Chartered, Standard Bank, Citigroup and Rand Merchant Bank to lead the transaction.
Receipt of the loans is expected to raise Kenya’s stock of public debt but also exert a downward pressure on the shilling which has been sliding against major foreign currencies for some time now.
Data from the Treasury tabled in Parliament last month showed Kenya’s total public debt hit Sh3.6 trillion in the year ending June 2016. This was a rise of about 27 per cent from the Sh2.8 trillion recorded at the end of June 2015.
The report showed that domestic and external debt account for 50.3 per cent and 49.7 per cent of the Sh3.61 trillion respectively.
Yesterday, Dr Thugge told MPs the current debt was sustainable owing to the fiscal actions that the Treasury had put in place. Overall, the debt is roughly between 53 and 54 per cent of the Gross Domestic Product (GDP) currently estimated to be about Sh7.5 trillion, Dr Thuge said.
“Our total debt (is) somewhere around Sh3.5 trillion. In our view this is a sustainable debt based on all the debt sustainability analyses that we have done and that has been done by the World Bank as well as the International Monetary Fund,” he said.
The World Bank and the IMF conduct sustainability analyses for countries where they work to ascertain their financial health.
Dr Thugge said that Kenya’s deficits were narrowing going by the budget policy statement and that the country was targeting a deficit of 6.9 per cent of GDP this year, a figure expected to drop to four per cent over the next three to four years.