Kenya: To issue sovereign bond in weeks

Kenya is on track to issue its first sovereign bond in a few weeks, a senior government official said late on Tuesday. National Treasury Cabinet Secretary Henry Rotich told journalists in Nairobi that the finalization of all documents required will be complete early February. "The successful implementation of the International Monetary Fund's Extended Credit Facility has established a firm foundation for the issuance of our first sovereign bond," he said during the conclusion of the visit by the IMF's MD Christine Lagarde in Kenya. The two-day visit was prompted by the remarkable progress that Kenya has achieved thanks to prudent financial reforms. The Treasury is targeting to issue Kenya's first Eurobond by early this year in a bid to plug the huge funding gap in its 19 billion U.S. dollar national budget. The money is expected to finance infrastructure projects such as the Lamu transport corridor, which includes new railways and roads. Kenya plans to raise at least one billion U.S. dollars in the international capital markets through the Eurobond. Rwanda and Nigeria are some of the African countries that have already floated a Eurobond in 2012. Rotich said that Kenya has had successful forms of engagement with the IMF in the past. "We have benefited from the financial institution's global experience in implementing public finance policies," he said. The Treasury official said that further discussions on partnership with the IMF will take place during the forthcoming Article Four Consultations scheduled for March. "We will also assess proposed policies going forward in order to gauge whether they are in line with the country's growth and development agenda," he said. He noted that Kenya is now positioned at the tipping point towards transiting to an emerging market. Speaking during the news conference, Lagarde said that the just concluded ECF program was developed jointly with Kenya in order address the economic challenges arising out of both internal and external challenges. She said that continued and careful implementation of fiscal devolution is crucial. "So, the quality of public spending needs to improve by providing more resources to both infrastructure investment and social programs," she said. The IMF chief said that Kenya should ensure proper governance and transparency when implementing infrastructure projects. "This will allow the public to have greater understanding of the projects," she said. She added that Kenya should maintain strong fiscal buffers that will cushion the country in case of internal and external shocks. The IMF official said that the move by the U.S. Federal Reserve to taper its bond buying program could have an impact on emerging markets. "A lot of capital that would have otherwise flowed into these countries would remain in the advanced economies. This could affect countries like Kenya that have close ties to these emerging markets," she said. She therefore called for greater consultation before nations change their monetary polices in order to reduce the spill over effects in the developing countries. "While recognizing this progress, we agreed that it will be important to continue to implement the reform agenda to bring the economy to middle-income status within the next decade," Lagarde said. She said sustained and even more inclusive growth that creates jobs is essential to ensure that all Kenyans can benefit. Lagarde emphasized continued and careful implementation of fiscal devolution, adding that the quality of public spending needs to improve by providing more resources to infrastructure investment and social programs, and by strengthening revenue mobilization and transparency, especially in the management of natural resource wealth. She said the process of regional integration needs to continue, drawing upon the experience and lessons learned from other regions. "I am impressed with the efforts of the Kenyan government and people to advance their country's success as a frontier economy, and am confident in Kenya's continued progress," the IMF chief said.