Kenya will issue a Sh65 billion sustainability-linked bond by June, which will help address its budget deficit while financing sustainability projects. This innovative bond features repayment terms dependent on the achievement of specified sustainability targets. The government is exploring alternative funding sources and focusing on domestic market reforms to support financial inclusion and improve funding strategies.
Kenya plans to issue its first sustainability-linked bond worth Sh65 billion by June, which aims to address its annual budget deficit. This bond, a first in the 2024/25 budget, will finance projects that promote social and environmental sustainability. The bond features lower repayment costs if Kenya meets its sustainability targets, whereas failure to achieve these targets could lead to increased coupon payments.
To bridge the budget deficit, the Kenyan government seeks alternative funding sources beyond traditional international bonds and domestic Treasury securities. The National Treasury’s updated Budget Policy Statement indicates that if macroeconomic conditions improve, the government will consider various financing options, including Panda, Samurai, and diaspora bonds. This approach is part of a broader instrument diversification strategy.
Additionally, the Kenyan government is focusing on concessional and non-concessional loans while limiting external commercial borrowing to essential projects that lack access to cheaper funding. There is also an ongoing reform of the domestic credit market, particularly concerning the retail-oriented M-Akiba bond to enhance financial inclusion.
The National Treasury is committed to revamping the M-Akiba platform to enable greater access for retail investors to government securities, thereby fostering a culture of savings and financial participation among citizens.
Kenya’s issuance of the Sh65 billion sustainability-linked bond represents a strategic initiative to manage its budgetary needs while advancing social and environmental objectives. By diversifying funding sources, the government aims to improve financial stability and promote sustainable development through efficient resource allocation.
Original Source: eastleighvoice.co.ke
