Kenya’s 2036 Eurobond raises $1.5bn in bid to retiring external debt

Kenya recently made headlines by raising $1.5 billion through a 2036 note issuance, with the proceeds earmarked for retiring external debt. This move has garnered attention and praise from market analysts for its impact on the country's debt management strategy and investor confidence. Daisy Anthea Nitwe, the Country Lead for Derivatives & Structured Solutions at Standard Bank Group Uganda, joined CNBC Africa to provide insights and analysis on these significant market developments. The successful auction of Kenya's 2036 Eurobond, which closed with a final yield of 9.95% and a coupon of 9.5%, attracted bids worth $4.9 billion. However, only $1.5 billion was accepted, signaling strong demand and investor confidence in Kenya's debt management. Nitwe highlighted that the authorities were able to achieve a 55 basis point savings, showcasing efficient debt management practices and renewed trust from the investor market. This success also led to a compression in the yield curve, particularly in the 2027 and 2028 notes, with yields decreasing by 50 and 55 basis points respectively. The debt office in Kenya is further pursuing a $1.5 billion private placement bond in the United Arab Emirates, aligning with efforts to diversify investor pools and support fiscal consolidation. The pending IMF ninth review program will also assess this new bond issuance alongside other fiscal metrics to ensure positive outcomes for the Kenyan economy. Despite the positive developments, concerns remain over weaker tax collections and a projected fiscal deficit of 4.1% for the 2024-2025 fiscal year. The authorities are looking towards a revenue-based fiscal consolidation plan post-2025 to address these challenges. Evidently, the Kenyan market has responded positively to these movements with renewed confidence and stability. The Central Bank of Kenya has leveraged the market to boost reserves, strengthening the country's financial position. Market watchers have observed stable interest rates and the consistent trading of the Kenyan shilling, indicating a favorable market sentiment. In contrast, Uganda's market performance has showcased stability in inflation, currency, and interest rates. The Ugandan shilling has remained steady, hovering between $36.50 and $37.00, supported by strong commodity flows, particularly coffee exports. However, concerns persist over high debt supply and underperforming tax collections, leading to slightly elevated interest rates in Uganda. Looking ahead, uncertainties surrounding global shifts and foreign aid policies could impact regional economies, including Uganda. The potential reduction in aid from the US and Europe poses risks to the Ugandan economy, emphasizing the need for prudent financial management and resilience in the face of external challenges. Daisy Nitwe's insights shed light on the market dynamics in Kenya and Uganda, highlighting the importance of effective debt management, fiscal consolidation, and proactive strategies to navigate evolving global economic conditions.