Kenya Launches 50 Billion Shilling Bond for Infrastructure Funding

In a bid to finance crucial development projects, the Kenyan government has recently announced a new six-and-a-half-year amortized infrastructure bond. The bond aims to raise 50 billion shillings, equivalent to $334 million.

The Central Bank of Kenya made this announcement in a statement released on Thursday (19/10) evening, as reported by Zawya.

The infrastructure bond is part of Kenya's ongoing efforts to fund infrastructure initiatives that will propel economic growth and development.

Starting from October 20 and lasting until November 8 this year, the bond will be available for purchase.

One noteworthy feature of this bond is that it will be completely tax-free, in line with the provisions of the Income Tax Act related to infrastructure bonds.

The interest rate for the bond will be determined by the market, reflecting current economic conditions and investor demand.

Bondholders have been advocating for higher interest rates on government debt securities, particularly in light of rising inflation and the depreciation of the Kenyan shilling.

These factors have contributed to a reduction in the value of fixed-income portfolios, prompting the call for increased interest rates.

Furthermore, the issuance of this infrastructure bond is part of a broader strategy by the Kenyan government to address a budget deficit of 4.4% for the 2023/24 fiscal year, which spans from July to the end of June.

The budget presented by Kenya's finance minister, Njuguna Ndung'u, takes place against a backdrop of a sluggish economy, mounting inflation, and slower-than-expected tax collection rates.

The funds raised from the bond are expected to make a significant contribution to closing the budget gap and advancing vital infrastructure projects in the East African nation.