Africa-Press – Kenya. Kenya has closed in on its $500 million (Sh70.4 billion) syndicated loan earmarked for development projects in the country.
A syndicated loan is a loan offered by a group of lenders usually referred to as a syndicate, who work together to provide funds for a single borrower.
The Sh70.4 billion three-year and five year Syndicated Medium Term Loan facility, is reduction from the $600 million (Sh84.5 billion) that the government had asked to borrow.
“Mandated by the Government of the Republic of Kenya as Bookrunners and Initial Mandated Lead Arrangers, are pleased to announce the successful closure of a USD 500 million 3-year and 5-year Syndicated Medium Term Loan (the “Facility”),” read a statement from the lenders seen by The Star.
The four lead arrangers of the syndicated loan are Citi Bank in London, Rand Merchant Bank, Standard Bank of South Africa Limited and Standard Chartered Bank.
Africa Export-Import Bank joined the Facility as Bookrunner and Mandated Lead Arranger and its subscriptions allocated towards the longer-term tranche.
The syndicated loan consists of a three-year tranche with a bullet payment and a five-year tranche that is amortising.
Under the bullet repayment Kenya will be required upon maturity, to issue a lump sum payment of any outstanding amount to be settled at once by the debtor.
On the other hand under amortising-this essentially means the repayment of debt through periodic installments over a period of time.
The proceeds from the Facility will be used by the National Treasury to finance the development projects as per the development budget approved by the Kenyan Parliament for the Fiscal Year 2022/2023.
The loan is expected to boost the forex reserves as ease the pressure on the dollar in the Kenyan Market that has seen the greenback hit record high of Sh140 against local currency.
While approving the loan the lenders said Kenya’s growth prospects remain positive, supported by favourable weather conditions, and subsidized fertilizer, expected to boost agricultural production and improve food security.
Additionally, they said continued economic recovery across various sectors due to easing of economic impact of COVID-19 pandemic
The loan comes at a time that the country is experiencing increased pressure to restructure its debt.
If the government fails to restructure Kenya could spend up to Sh5 billion daily on public debt service in the current financial year
The government expects public debt service costs to grow by 30 percent to Sh1.8 trillion in the fiscal year 2023/24, from Sh1.38 trillion in the fiscal year ended June 30, highlighting the burden President William Ruto confronts as he implements his Sh3.68 trillion budget.
This means that, unless some of the principal debts maturing in 2023/24 are refinanced, debt service could account for half of the government’s Sh3.68 trillion planned expenditures for the entire year.
This is equivalent to 70percent of the Sh2.57 trillion taxes Treasury expects to collect from the economy, implying spending Sh70 for every Sh100 collected from taxpayers to settle the public debt.
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