Timetable for issuance?

The point is that the envisioned capital goods will be imported in USD. So the question is whether to mitigate FX volatility during project life cycle by having a stash of ready USDs or borrow locally and keep sweating the USD/KES every time a "chuma" is required from abroad?

Your guess is as good as mine.

Also, during the tenor of the Eurobond (10yrs), exports should be up; oil, minerals, agriculture, services, FDI, Portfolio inflows etc.

More clean energy to cut oil imports, local food security via the irrigation project in Galana and such likes.

The bond does make sense lower but considering how long it's taken they must pay the market price with is around 475-525bps above 10yr US treasuries based on existing African Eurobonds. They'd also need the reserve buffer to fend off any speculative KES attacks but the fact is that they must maintain high domestic interests to reduce fx volatility. EA yields are still higher comparatively to emerging markets which augurs well for KES. The current a/c isn't going to improve but the perception of Kenya abroad is still positive. Read below.

http://www.bloomberg.com...-selloff-to-deepen.html

Domestic debt is pretty expensive at the moment and the Eurobond is more or less an avenue to reduce refinancing risk (10yrs) and reduce domestic borrowing (local bond yields). Issuance should be within the next 40 days (launch to finish) so looking at mid April for it to be completed. We can only borrow externally when the timing is right, which seems to be between our elections (unfortunate that tapering is complicating the situation).

They have a limit of $1.75bn for foreign borrowing so even in the event of an over subscription they stick to only borrowing $1.5bn. They are estimating that the next 3 year will require 100bn in infrastructure spending so the suggestion of rolling over the 2012 syndication into a 3 year tenor is also timely.

Over the next few years they'll be able to explore cheaper (concessionary) funding from the IMF and China. But the fact that we are a country that has huge twin deficits means that we must grab on these opportunities when they come even if they're expensive. The potential headaches in the future will be with county government borrowing which must be guaranteed by the central government.

A task force is being set up to manage potential liabilities and I can imagine the lobbying they'll face from the current crop of governors. We all know counties can't mobilize much revenue so they'll be looking to borrow locally should they be unhappy with current allocations. Do the counties have the ability to manage their liabilities when Treasury has only just managed to build their debt sustainably?

Get prepared to pay high pump prices. Oil, gas prices are already up petrol will most definitely follow.

OK. Here goes.

Weekend homework;

1. Go onto the AfDB website under Kenya and read the latest.

2. Go onto the CBK website & download the MPC press release and read keenly. While there, also look at the results of the latest treasury auctions.

3. Go onto the Met. Dept website and read the long forecast.

By Monday. 20mks.

Respectable Leadership>>> Uhuru, Ruto to take 20pc pay cut in bid to tame huge wage bill >>> http://www.businessdailyafrica....0/-/q0btv7z/-/index.html

GoK publishes meteorological outlook for March–May rainy season

The Government of Kenya (GoK) has published a meteorological outlook for the March-May rainy season (“long rains” season). The primary agricultural producing regions of Western, Nyanza, Rift Valley and the Central Kenya Highlands are expected to receive near-normal rainfall and potentially higher than normal rainfall. This should support favourable agricultural output and GDP growth in 2014 (agriculture accounts for approximately 25.0% of GDP). Agricultural regions in Southeastern Kenya are however expected to witness depressed rainfall. The water catchment areas of Tana River, Turkwell and Sondo Miriu that feed the country’s primary hydroelectric power generation dams are expected to receive higher than normal rainfall that will positively affect hydrology and hydroelectric power generation in 2014. As a result, we expect Kengen, Kenya’s largest power producer to maintain and potentially grow its hydro-electric capacity (66.0% of generation capacity in FY12) which in addition to additional geothermal capacity, will reduce reliance on costlier thermal energy and lead to lower electricity prices. (Source; Ministry of Environment, Water and Natural Resources; Kestrel Research)

Kenya’s plan to raise Sh172 billion through the issuance of a sovereign bond may take even longer to hit the markets pending proposed amendments to laws governing state borrowing by the Treasury.

Government has proposed changes to the Public Finance Management (PFM) Act, 2012 some of which touch on the issuance of external securities.

http://www.nation.co.ke/...2/-/t4ewb5z/-/index.html

Anyone with GDP projections for 2014?

Kenya's Top 20 Exports

1 Tea - $1,000,683,170.47 21%
2 Cut Flowers - $610,664,515.23 13%
3 Coffee -$287,895,784.77 5.9%
4 Refined
Petroleum - $190,222,175.65 3.9%
5 Legumes - $187,349,202.11 3.8%
6 Cement - $78,760,534.18 1.6%
7 Other
Live Plants - $77,377,519.92 1.6%
8 Other Processed
Fruits & Nuts - $74,946,678.63 1.5%
9 Non-Knit
Women's Suits - $74,910,805.00 1.5%
10 Carbonates - $74,624,949.61 1.5%
11 Rolled Tobacco - $72,445,351.00 1.5%
12 Other Processed
Vegetables - $49,882,265.59 1.0%
13 Knit Sweaters - $48,387,247.00 0.99%
14 Processed Tobacco- $47,749,489.00 0.98%
15 Knit Women's Suits-$47,258,811.00 0.97%
16 Pkgd Medicaments -$45,045,773.00 0.92%
17 Soap - $44,338,607.20 0.91%
18 Feldspar -$42,899,247.09 0.88%
19 Tanned Equine and
Bovine Hides - $41,335,521.74 0.85%
20 Fish Fillets - $40,873,177.00 0.84%

Kenya's Top 20 Imports

1 Tea - $985,608,949.83 15%
2 Wheat - $409,183,627.74 6.3%
3 Refined Petroleum -$301,156,522.74 4.6%
4 Legumes -$149,580,582.57 2.3%
5 Planes, Helicopters,
and/or Spacecraft -$128,745,483.00 2.0%
6 Palm Oil - $119,680,418.01 1.8%
7 Raw Sugar - $107,750,265.14 1.7%
8 Used Clothing - $92,620,492.43 1.4%
9 Mixed Mineral or
Chemical Fertilizers -$89,520,516.53 1.4%
10 Cement - $86,459,331.38 1.3%
11 Delivery Trucks -$78,170,231.00 1.2%
12 NonKnit Women's Suits-$74,748,356.00 1.2%
13 Pkd Medicaments -$56,813,321.00 0.88%
14 Motorcycles - $53,644,414.00 0.83%
15 Digital Disk Drives -$53,231,723.00 0.82%
16 Other Processed
Fruits and Nuts - $50,448,357.81 0.78%
17 Coated FlatRolled Iron-$49,335,822.92 0.76%
18 Knit Sweaters -$48,516,484.00 0.75%
19 Polyacetals -$47,760,622.14 0.74%
20 Knit Women's Suits -$47,447,118.00 0.73%

Just seen that Nigeria is the 6th importer of cut flowers and they get them from the Netherlands who import from Kenya wao!