Rotich reaches out to Speaker over Eurobond

Money Markets

Jubilee MPs who walked out of a meeting called by the Treasury secretary Henry Rotich on April 30, 2014 to lobby them to back payment of Sh1.4 billion to one of the Anglo Leasing firms. Photo/GERALD ANDERSON  NATION MEDIA GROUP

By GEOFFREY IRUNGU

In Summary

• Treasury Secretary Henry Rotich said Thursday that he would seek the advice of the Speaker of Parliament Friday in a bid to convince the House of the need to allow the payment for the dubious contracts.
• Treasury has planned a Sh128-174 billion ($1.5-2 billion) bond for more than a year now, but it has been delayed for a variety of reasons, ranging from unfavourable international financial conditions and amendments to the Public Financial Management Act.

 

The move by MPs to reject attempts to pay the Sh1.4 billion debt for one of the Anglo-Leasing contracts threatens to further delay the issuance of the long-awaited sovereign bond and possibly raise borrowing rates.

However Treasury Secretary Henry Rotich said Thursday that he would seek the advice of the Speaker of Parliament Friday in a bid to convince the House of the need to allow the payment for the dubious contracts.

Mr Rotich said in a statement that failure to pay the amount owed after an international arbitration court had awarded the concerned companies would mean that Kenya would be perceived as a country that does not repay its debt.

The Eurobond is intended to diversify funding sources and cut domestic interest rates since the government will reduce its focus on local sourcing of financing. In the coming year domestic borrowing is set to rise by nearly Sh90 billion.

“If you do not repay your debt and the court has actually ordered you to do so, then how can people give you their money, when they are aware you are a bad debtor?” asked Mr Rotich in a telephone interview Thursday.

READ: Sh1.4bn Anglo-Leasing settlement clears way for Eurobond

Some Jubilee Coalition MPs stormed out of a meeting called to rally support for the passage of a motion to approve the payments.

The MPs accused the Treasury principal secretary Kamau Thugge of failing to disclose the beneficiaries of the funds to be released. They wanted the faces behind the Anglo-Leasing companies, especially their local contacts, unmasked.

READ: Jubilee MPs walk out of Anglo-Leasing meeting

“Since Parliament has gone on recess, we will wait for them to debate. In the meantime, I will seek the advice of the Speaker tomorrow (today),” said Mr Rotich.

The Treasury has planned a Sh128-174 billion ($1.5-2 billion) bond for more than a year now, but it has been delayed for a variety of reasons, ranging from unfavourable international financial conditions and amendments to the Public Financial Management Act.

This week Parliament passed the required amendment that allows the Finance Cabinet Secretary to determine the mode of borrowing from offshore markets.

In the coming fiscal year, the Government has set aside Sh14.7 billion partly to pay interest on the long-planned sovereign bond. The amount for paying interest for new loans forms the bulk of the Sh24.5 billion to be paid external creditors next year, a sharp climb from Sh11 billion last year.

The Treasury has maintained that Kenya should pay so it cannot only issue the Eurobond but also avoid having to pay penalties amounting to nearly Sh97 million per year.

Failure to procure funds from overseas is seen as likely to maintain the high interest rates that currently rule the market. The average lending rates for commercial banks stand at about 17 per cent.