Treasury Decides it Another Eurobond Rather Than Default or Print Money

[Nowayhaha]

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https://www.standardmedia.co.ke/business/article/2001471210/treasury-eyes-costly-eurobond-to-stay-afloat-amid-debt-crisis

[RV Pundit]

Default is very stupid. Printing money will create inflation. Us fed have signalled lowering of interest rate so usd will flow to frontier markets soon

[Githunguri]

It doesn't make sense. The solution is not floating another dollar debt (Eurobond) but to negotiate with the lenders and convert this dollar debt to the kenya shilling,

The kenya smiling has depreciated against the USA dollar from i think 88 in 2013 to 140 in 2023..that's like maybe 40% depreciation, It means the Eurobonds/dollar debt the government sold 5-10 years ago worth (USD/KES 88 ) $4BN/352BN ,The same $4BN today ((USD/KES 140) is worth 560BN today...It technically means that even if KRA revenues rise by 200BN,It doesn't have any economic impact because that money is used to service eurobonds and other dollar denominated debt.

The solution to kenya debt crisis should be to stop reliance on foreign currency debt, reduce grain imports through food security investments, reduce corruption to ensure money meant for development projects trickles down to ensure increase in tax revenues. Otherwise this cycle will continue.

[RV Pundit]

It doesn't make sense. The solution is not floating another dollar debt (Eurobond) but to negotiate with the lenders and convert this dollar debt to the kenya shilling,

The kenya smiling has depreciated against the USA dollar from i think 88 in 2013 to 140 in 2023..that's like maybe 40% depreciation, It means the Eurobonds/dollar debt the government sold 5-10 years ago worth (USD/KES 88 ) $4BN/352BN ,The same $4BN today ((USD/KES 140) is worth 560BN today...It technically means that even if KRA revenues rise by 200BN,It doesn't have any economic impact because that money is used to service eurobonds and other dollar denominated debt.

The solution to kenya debt crisis should be to stop reliance on foreign currency debt, reduce grain imports through food security investments, reduce corruption to ensure money meant for development projects trickles down to ensure increase in tax revenues. Otherwise this cycle will continue.

Foreign debt is fdi and gov won't crowd out local lending..its about getting the right mix.Eurobond is floated to retail  creditors you can't just

[Githunguri]

It doesn't make sense. The solution is not floating another dollar debt (Eurobond) but to negotiate with the lenders and convert this dollar debt to the kenya shilling,

The kenya smiling has depreciated against the USA dollar from i think 88 in 2013 to 140 in 2023..that's like maybe 40% depreciation, It means the Eurobonds/dollar debt the government sold 5-10 years ago worth (USD/KES 88 ) $4BN/352BN ,The same $4BN today ((USD/KES 140) is worth 560BN today...It technically means that even if KRA revenues rise by 200BN,It doesn't have any economic impact because that money is used to service eurobonds and other dollar denominated debt.

The solution to kenya debt crisis should be to stop reliance on foreign currency debt, reduce grain imports through food security investments, reduce corruption to ensure money meant for development projects trickles down to ensure increase in tax revenues. Otherwise this cycle will continue.

Foreign debt is fdi and gov won't crowd out local lending..its about getting the right mix.Eurobond is floated to retail  creditors you can't just

That foreign debt should be in shillings not dollars.Can you check the percentage of foreign denominated debt in developed countries?

[Kadudu]

Which foreign lendor will agree to those terms? I think you mean only local lendors should be considered. That will drain all the cash for local businesses.

That foreign debt should be in shillings not dollars.Can you check the percentage of foreign denominated debt in developed countries?

[Githunguri]

Which foreign lendor will agree to those terms? I think you mean only local lendors should be considered. That will drain all the cash for local businesses.

That foreign debt should be in shillings not dollars.Can you check the percentage of foreign denominated debt in developed countries?

Eurobonds have two problems.
CURRENCY DEPRECIATION
VARIABLE INTEREST RATES.

1) If the debt in Kenya shilling is risky, It means that the interests will be high which means investors will buy.

 2) Are you aware that the Kenya Eurobond yields sometimes reach over  20% Interest payment?This is after currency depreciation against the dollar by over 40 %?That means we are paying 50% interest rate if you account currency depreciation and interest payment of eurobonds.

( 3) We have over 4.6TN cash in Kenyan banks.The solution is to have kenya banks and CBK sign deals buy the eurobonds and convert them to kenya shillings and have citizens buy them though mobile phone through NSE.

Otherwise,You cannot have a KRA increasing its revenues by 300BN and that money going to pay eurobonds investors whose main profit gimmick is to make money though currency depreciation and variable interest rates.

Its that simple.

[hk]

 3) We have over 4.6TN cash in Kenyan banks.The solution is to have kenya banks and CBK sign deals buy the eurobonds and convert them to kenya shillings and have citizens buy them though mobile phone through NSE.

Kenya has been unable to raise 30b locally at 13% for 3 tenor , definitely 250b for 10yrs is impossible. Local banks have more than $9b deposits but no one is willing to buy bonds in $, that's why the idea of local bonds in $ never took off https://www.businessdailyafrica.com/bd/markets/capital-markets/how-dollar-bond-will-release-idle-billions-3982978.

[RV Pundit]

Appears Treasury adamant with interest rate - so I guess the budget will not be funded - and pending bills will mount. Look like we need huge budget cut - I dont know what will be cut.

Ruto need to use next budget for the great reset - let it be one year of PAIN - and we sort macro-economics.

Take hard decision including lowering some of taxes, reduce the budget even further/ cut recurrent expenditure, reduce borrowing - strangle the public sector beast for a year.

And of course hope the private sector will do what public sector has been doing under uhuru - massively invest in infrastracture, factories, projects. Huge gamble otherwise public sector investment will soon be needed again.

Then in 2024/2025 - we start on clean slate with debt/gdp of 55%; debt servicing at 33%; balanced budget (no recurrent expenditure deficit); low interest; high revenues from low tax that captures many; all solid macro-economics;

Politically this best time for PAIN - as the next election is 2027 - so this need to be done now - and towards election - Ruto can start building roads and etc.

3) We have over 4.6TN cash in Kenyan banks.The solution is to have kenya banks and CBK sign deals buy the eurobonds and convert them to kenya shillings and have citizens buy them though mobile phone through NSE.

Kenya has been unable to raise 30b locally at 13% for 3 tenor , definitely 250b for 10yrs is impossible. Local banks have more than $9b deposits but no one is willing to buy bonds in $, that's why the idea of local bonds in $ never took off https://www.businessdailyafrica.com/bd/markets/capital-markets/how-dollar-bond-will-release-idle-billions-3982978.

2) Are you aware that the Kenya Eurobond yields sometimes reach over  20% Interest payment?This is after currency depreciation against the dollar by over 40 %?That means we are paying 50% interest rate if you account currency depreciation and interest payment of eurobonds.

( 3) We have over 4.6TN cash in Kenyan banks.The solution is to have kenya banks and CBK sign deals buy the eurobonds and convert them to kenya shillings and have citizens buy them though mobile phone through NSE.

Otherwise,You cannot have a KRA increasing its revenues by 300BN and that money going to pay eurobonds investors whose main profit gimmick is to make money though currency depreciation and variable interest rates.

Its that simple.

[hk]

Appears Treasury adamant with interest rate - so I guess the budget will not be funded - and pending bills will mount. Look like we need huge budget cut - I dont know what will be cut.

Ruto need to use next budget for the great reset - let it be one year of PAIN - and we sort macro-economics.

Take hard decision including lowering some of taxes, reduce the budget even further/ cut recurrent expenditure, reduce borrowing - strangle the public sector beast for a year.

And of course hope the private sector will do what public sector has been doing under uhuru - massively invest in infrastracture, factories, projects. Huge gamble otherwise public sector investment will soon be needed again.

Then in 2024/2025 - we start on clean slate with debt/gdp of 55%; debt servicing at 33%; balanced budget (no recurrent expenditure deficit); low interest; high revenues from low tax that captures many; all solid macro-economics;

Politically this best time for PAIN - as the next election is 2027 - so this need to be done now - and towards election - Ruto can start building roads and etc.

The era of big government and tenderprenurs is coming to an end. There's no other option other than cutting spending and privatization. Ndii thought Kenya could grow out of  debt crisis. Next year budget has to be cut to maybe 3T from the projected 3.7T . Where to cut, start with everything other than payroll.

[gout]

Scrapping CBC and reverting to 8-4-4 was an opportunity to cut spending on education but they decided to adopt the expensive monkey.

[RV Pundit]

Scrapping CBC and reverting to 8-4-4 was an opportunity to cut spending on education but they decided to adopt the expensive monkey.

Yes we are fcked

[Githunguri]

3) We have over 4.6TN cash in Kenyan banks.The solution is to have kenya banks and CBK sign deals buy the eurobonds and convert them to kenya shillings and have citizens buy them though mobile phone through NSE.

Kenya has been unable to raise 30b locally at 13% for 3 tenor , definitely 250b for 10yrs is impossible. Local banks have more than $9b deposits but no one is willing to buy bonds in $, that's why the idea of local bonds in $ never took off https://www.businessdailyafrica.com/bd/markets/capital-markets/how-dollar-bond-will-release-idle-billions-3982978.

[hk]

Eurobonds investors don't get 21% interest since they buy in dollars and don't convert to kenya shilling(the bond is listed in london, its not locals buying eurobonds), its kenya that pays 21% once depreciation is factored.  Yes the government is being forced to pay higher interest rates, meaning cbk will be forced to raise rates higher. There's a limit how much debt the locals can buy. Already government has crowded out the private sector.

[Githunguri]

Eurobonds investors don't get 21% interest since they buy in dollars and don't convert to kenya shilling(the bond is listed in london, its not locals buying eurobonds), its kenya that pays 21% once depreciation is factored.  Yes the government is being forced to pay higher interest rates, meaning cbk will be forced to raise rates higher. There's a limit how much debt the locals can buy. Already government has crowded out the private sector.

(1) The owners of Kenya Eurobonds are Kenyan banks and politicians tender kickbacks.They steal money,stash it in banks in the cayman islands and ireland and buy eurobonds and they call themselves international investors.Of course the yield on the eurobond changes depending on currency movement.

 (2)Do you know about loan pricing?The first parameter is inflation.Kenya annual inflation is about 9%.So if you factor things like annual interest or profit for bond holders at 10%,Then the annual interest rates local banks can accept is from 20%.If the gov doesnt comply,they buy lend to private businesses and public or buy USA treasury bonds which earn them.2% annually and profit from currency depreciation.

[hk]

(1) The owners of Kenya Eurobonds are Kenyan banks and politicians tender kickbacks.They steal money,stash it in banks in the cayman islands and ireland and buy eurobonds and they call themselves international investors.Of course the yield on the eurobond changes depending on currency movement.

 (2)Do you know about loan pricing?The first parameter is inflation.Kenya annual inflation is about 9%.So if you factor things like annual interest or profit for bond holders at 10%,Then the annual interest rates local banks can accept is from 20%.If the gov doesnt comply,they buy lend to private businesses and public or buy USA treasury bonds which earn them.2% annually and profit from currency depreciation.

Kenya banks dont have Eurobonds on their portfolio just look at their financial statements.  Its possible that there are kenyans eurobond holders through shell companies.
Core inflation in bond pricing is major factor both in primary and secondary bond market. Its the reason why treasury is cancelling offerings and undersubscription, while the short term bonds are oversubscribed. Investors aren't accepting 13% for 365 but are oversubscribing 10% for 90days tbill.  Banks are lending at 14-18% to private sector and rising.

[gout]

What does this mean?? Ufool era heists are banked here? Why is interbank facilities an issue??

I know matatus like Supermetro and clubs are working for the banks, but this is still unfathomable in a collapsing economy.

3) We have over 4.6TN cash in Kenyan banks.

[Georgesoros]

What does this mean?? Ufool era heists are banked here? Why is interbank facilities an issue??

I know matatus like Supermetro and clubs are working for the banks, but this is still unfathomable in a collapsing economy.

3) We have over 4.6TN cash in Kenyan banks.

If there is 4T in banks, why not borrow locally?
Or isi ti because investors lost confidence in govt??