Kenya to Issue Bigger Local Bonds in World Bank-Backed Program
Kenya to Issue Bigger Local Bonds in World Bank-Backed Program
(Bloomberg) -- Kenya plans to issue bigger Treasury bonds as part of a program supported by the World Bank to strengthen the East African nation’s domestic debt market.
The government will offer a minimum of 50 billion shillings ($435.8 million) of local-currency bonds maturing in or less than five years under the so-called development policy operation, or DPO, according to the Washington-based lender. Those of a longer maturity will seek at least 75 billion shillings.
Domestic debt accounts for about half of public borrowing in Kenya, highlighting the importance of local bonds in funding the nation’s budget shortfall. Local debt was 4.15 trillion shillings by March 11, according to central bank data.
The debt reforms seek to help the government to access longer-term debt at a lower cost, reduce refinancing risks and increase transparency in the market, according to the report.
“The measures also support overall capital market development and deepening, particularly as a higher quality yield curve will provide better price discovery and improved reference pricing as to the long-term risk-free rate and cost of capital in Kenya,” the World Bank said.
The yield curve for government securities is currently highly fragmented, with relatively small bonds and liquidity is thin in the secondary market, according to the World Bank. This increases the cost of financing due to higher liquidity premiums, it said.
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