Utilise Eurobond cash wisely

Opinion and Analysis

 

The Treasury building in Nairobi. Photo/FILE

Eurobond investors now give Kenyans Sh770bn reasons to believe in country

Even as Kenyans celebrate the successful issue of a Sh176 billion ($2 billion) Eurobond, it must not be lost on policymakers and the government of the day that the huge debt could cause serious macro-economic instability in future if it is not prudently utilised.

The reality is that even as Kenyans celebrated success of the multi-billion shilling issue, the country’s external debt load shot up by the full amount of the Eurobond the minute it was credited in the Treasury’s account.

 

Of this amount, Sh44 billion ($500 million) will be due in five years’ time. The other tranche of Sh132 billion will be payable in 10 years.

Before maturity of the bond, taxpayers will be parting with billions of shillings every year in interest payments to the bondholders.

On the face of it, the repayment of the Eurobond should not be a problem if the funds received are utilised in financing growth-spurring road, energy and agriculture projects as promised.

But the danger, and the reality, is that the cash could be squandered on white elephants and recurrent expenses that are not capable of moving Kenya’s growth rate by even the slightest margin.

If this happens, then Kenyans should be braced for economic hardships experienced by countries such as Greece and Argentina which went on an in-mitigated borrowing spree, only to experience severe instability when their economies could not handle the re-payments.