The government has issued a Sh50 billion 17-year infrastructure bond whose proceeds it aims to use to fund development projects in the current financial year that ends in June.
The Central Bank of Kenya (CBK) has set the period of sale for the bond, which will be traded on the Nairobi Securities Exchange (NSE), runs from Wednesday to March 7.
The first interest payment on the bond is scheduled for September 11 this year while the final redemption of all outstanding amounts of the bond will be paid on February 28, 2040.
“The bond will be tax-free as is the case for infrastructure bonds as provided for under the Income Tax Act,” said CBK.
The issue of the bond comes at a time the National Treasury is facing funding challenges amid pressure on the exchequer by subsidies, drought, and other urgent spending needs.
This has seen the Treasury significantly cut spending on development projects in the financial year 2022/23 which is set to affect numerous projects which were allocated significant sums by former President Uhuru Kenyatta.
In the first supplementary budget, the Treasury increased recurrent expenditure by Sh92.97 billion to Sh1.496 trillion from Sh1.403 trillion, a 6.62 percent growth while development expenditure was cut by 14.86 percent (Sh106.28 billion) to Sh609.06 billion from Sh715.35 billion.
The tightening fiscal space saw the Treasury move to swap short-term domestic debt with a longer-term infrastructure bond in December to ease debt repayment pressures.
The CBK issued the infrastructure bond maturing in six years as it sought to raise Sh87.8 billion from investors who were holding Treasury bills issue numbers 2494/91, 2454/182, 2380/364, and Treasury bond issue number FXD1/2021/2.
Investors would however bid for only 60.25 percent of the Treasury bills and bonds the government was offering to swap.
This comes at a time the government is seeking to establish a bank or fund that will collect funds aimed at funding development projects.
The fund will initially be injected with monies collected from the government’s privatization programme that seeks to offload the government’s stake in select parastatals to raise cash.
“An infrastructure fund will be established with initial capitalisation from privatisation proceeds, with a view to progressively reducing the financing of commercially viable infrastructure projects from the budget,” said the Treasury in the 2023 Budget Policy Statement (BPS).
