By O’brien Kimai
Local and international investors pumped 35 billion shillings into the first 15-year infrastructure bond against the targeted 30 billion shillings.
This represents a 17 percent oversubscription pointing to a growing appetite for tax and risk free government papers. Commercial banks accounted for the largest pool of investors in the bond.
Kenya is pumping a huge portion of her funds into infrastructure development following years of under-development.
In the current financial year, the government plans to spend 30.4 percent of the 2.4 trillion shillings budget on roads, water and health facilities.
However, with a budget deficit of close to 400 billion shillings, the national treasury is exploring beyond the traditional means of funding the budget.
To plug the gap, the government plans to borrow 223 billion shillings from the domestic market. Early this month, the central bank invited bids for the first 15 year infrastructure bond to fund projects in the energy, water and the roads sectors.
Today (Friday), the bank has announced the closure of the instrument, receiving bids totaling to 35 billion shillings against the 30 billion shillings the government was targeting.
The bond with a coupon rate of 12 percent will be listed at the Nairobi Securities Exchange and will start trading on Tuesday next week.
The Central Bank says it received 1,268 applications amounting to 35 billion shillings but accepted 1,194 bids worth 30.5 billion shillings.
The bond will be tax free as is the case for all infrastructure bonds under the Income Tax Act.