Kenya borrows US$1.5 billion from domestic market

Kenya has borrowed a record high of 213 billion Kenyan shillings (about 1.5 billion U.S. dollars) from the domestic market through an infrastructure bond it floated with several “sweeteners” to woo investors amid a cash crunch.

The amount is the largest ever to be raised from the domestic debt market, with the bond having been tax-free and attracted a yield of a record 15.8 percent, said the Central Bank of Kenya in a statement released Wednesday in the Kenyan capital of Nairobi.

The central bank noted that it received bids worth 1.58 billion dollars against a target of 419 million dollars and accepted the 1.5 billion dollars.

Kenya floated the security at a time the government was facing a liquidity crisis that had seen it fail to pay salaries on time, disperse money to counties and honor its debt obligations.

To woo investors, besides making the paper tax-free and putting a yield of over 15.8 percent, the bond had a short tenor of seven years.

The 358 percent performance rate of the security shows that the “sweeteners” worked at a time many investors had given the long-term securities a cold shoulder after the Kenyan government announced in April that it was facing a liquidity crisis. The money has been raised at a time Kenya has received 1 billion dollars from the World Bank for budgetary support.

The East African nation’s public debt currently stands at 67.8 billion dollars, with 35 billion dollars being external and the rest domestic.

The World Bank warned that while the debt remains sustainable, the country is at risk of debt distress. Enditem