Financial experts are offering varied perspectives on Kenya’s recent issuance of a $1.5 billion Eurobond, aimed at clearing the inaugural bond taken in 2014, due on June 24. The new Eurobond, which attracted oversubscription from investors, consists of three installments with a weighted average life of six years and maturity expected in 2031. While the pricing of the bond fell below the initial guidance, it remains comparatively higher than rates offered by other African sovereigns this year.

Some experts, like Thuo Ndung’u, an economics professor, express skepticism about the necessity of issuing a new bond to retire old debt, especially considering recent inflows of funds from multilateral and commercial loans. Ndung’u questions the rationale of borrowing at 10.3 percent to settle a debt incurred at 6.8 percent, citing potential fiscal risks associated with increasing public debt beyond sustainable levels.

Solomon Kulundu, an investment partner, criticizes the high coupon rate of 10.3 percent and describes the borrowing strategy as “illogical,” given the availability of alternative financing options with better terms. He warns of future consequences and emphasizes the need for prudent fiscal management to avoid excessive debt accumulation.

In contrast, proponents of the new bond highlight its role in bolstering investor confidence and stabilizing the exchange rate, evidenced by the appreciation of the shilling against the dollar. Job Mogeni, a state-aligned economist, lauds the positive market response to the bond issuance and predicts improved fiscal and forex conditions once the $2 billion debt is settled.

However, concerns persist regarding Kenya’s debt management practices, with critics pointing to inefficiencies, corruption, and wasteful expenditure in government spending. Michael Muriithi, a financial commentator, warns of potential disaster resulting from mismanagement of borrowed funds and urges greater accountability and transparency in fiscal governance.

National Treasury CS Njuguna Ndung’u defends the Eurobond issuance as part of the government’s strategy to optimize debt liabilities and maintain a sustainable debt profile. He emphasizes the importance of diversified financing approaches to mitigate risks and ensure long-term debt sustainability for Kenya.

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