Treasury Raises Ksh 98.6 Bn in 9-year Infrastructure Bond

Kenya's 19-year infrastructure bond (IFB1/2022/019) was oversubscribed by 176.3 per cent with bids worth Ksh 132.3 billion received.

A section of The Nairobi Expressway

The 19-year infrastructure bond (IFB1/2022/019) was oversubscribed by 176.3 per cent with bids worth Ksh 132.3 billion received, an indication of a high appetite for the longer-term securities.

According to the auction results issued by the Central Bank of Kenya Wednesday, it received bids worth Ksh 132,257.79 billion against its offer of KSh 75,000.00 billion.

This was the first IFB issue in 2022 and the second in the 2021/22 fiscal year.

However, it accepted bids worth Ksh 98,637.46 at a rate of 12.965 per cent. The funds raised will fund infrastructure projects in the 2021/2022 budget estimates.

Market analysts had projected an oversubscription based on the attractive tax-free yield as well as capital appreciation potential appeals to diverse investor segments.

The last two issued IFBs – IFB1/2021/18 and IFB1/2021 had coupon rates of 12.67% and 12.74% respectively and were oversubscribed (147.6%, 201.7%) largely due to high market liquidity and the opportunity for attractive capital gains in the secondary market Sterling Capital Analysts note.

The National Treasury’s Supplementary Budget for the fiscal year 2021/22 presented to the National Assembly, seeks to increase the gross total budget by 3.3% to Kshs 3,377.8 billion, from the previous estimates of Kshs 3,269.2 billion. 

The infrastructure’s budget has been increased by Kshs 7.3 billion to Kshs 202.5 billion from the earlier approved Kshs 195.2 billion.

“The 3.7% increase is mainly attributable to an additional Kshs 17.4 billion committed towards the Road Maintenance Levy Fund for maintenance of roads. However, the increase was weighed down by Kshs 7.4 billion reduction in the budget allocation towards rehabilitation and construction of roads and bridges,” Cytonn Investments said.

Key to note, some of the road works that shall receive additional funding include the dualling of Nairobi Eastern Bypass, Garissa – Isiolo road and Nairobi- Nakuru Mau Summit road, construction of Makupa Causeway Bridge, and, upgrading of Lamu-Ijara-Garissa Road.

Approval of the 2021/22 supplementary budget will increase the fiscal deficit to an estimate of 12.9% of GDP, from the earlier estimated deficit of 11.4% of GDP for FY’2021/22. 

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