The Kenyan government plans to raise finance through a new syndicated loan just a few days after securing seventy billion shillings from a group of banks.
According to the Business Daily, the government intends to raise Ksh.141.5 billion through an arrangement by the Trade and Development Bank (TDB).
“In a change of tack, the Treasury is exploring the use of a credit insurance cover for the new syndicated loan to boost appetite from global commercial banks and increase its chances of success,” read part of the report.
A syndicated loan is financing by a group of lenders (syndicate) who work together to provide funds for a single borrower.
This kind of loan can involve a fixed amount of funds, a credit line, or a combination of the two.
On July 6th, the government acquired another Ksh70 billion syndicated loan.
Citibank, London Branch, Rand Merchant Bank, a division of FirstRand Bank Limited (RMB), The Standard Bank of South Africa Limited (Standard Bank), Standard Chartered Bank (Standard Chartered) and their respective affiliates sourced the facility.
In a statement after the declaration, the financial institutions stated that the loan was to fund development projects in the country.
“The proceeds from the facility will be used by the The National Treasury to finance the development projects as per the development budget approved by the Kenyan Parliament for the Fiscal Year 2022/2023,” the lenders announced.
Kenya’s Ballooning Budget
As of April 2023, Kenya public debt stood at Ksh9.634 trillion.
However, this is expected to rise by the end of the current financial year.
This as President William Ruto’s administration tries to raise revenue for the current fiscal year.
Moreover, Ruto’s 3.7 trillion budget faces a Ksh.720 billion deficit.
Out of this, the Treasury plans to finance Ksh.586 billion from the domestic market while the remaining Ksh.134 billion will be from external lenders.
Finance Act 2023
Ruto was banking on the Finance Act 2023 to increase revenue to finance his ambitious projects, including the Affordable Housing Project and Universal Health.
However, Busia Senator Okiya Omtatah filed a petition that the High Court that slammed instant brakes on the implementation of the piece of legislation.
Among the proposals included in the Act is a housing levy of 1.5 percent on gross pay.
Further, it increased the Value Added Tax on petroleum products from 8 percent to 16 percent.
The bill subjected digital content creators to a 5 percent tax while betting companies will pay 12.5 percent.
Already, the opposition is mounting pressure through demonstrations on President William Ruto to repeal the Act.