Nairobi — Kenya is in talks with lenders to roll over a $760m syndicated loan this fiscal year and lengthen its maturity in order to make debt repayments more manageable, a senior treasury official says. .

The loan, which was initially for two years, was arranged by TDB bank, said Kamau Thugge, the principal secretary at the ministry of finance.

The government aims to increase the tenor of the loan to seven or 10 years, he said, adding that  it has not yet struck an agreement with lenders whom he did not identify.

“We will be going back to the international market to lengthen the maturities of the debts that are falling due. It does not increase our debt,” Thugge said.

“It is just a rolling over of the syndicated loan. We are just rolling it over. There is no new debt.”

New Eurobond?

The government is, however, considering issuing a new Eurobond at a later date, part of efforts to raise 272-billion shillings ($2.65bn) in net external financing that is contained in 2018’s budget.

“That is the one that we think is going to be the least costly and the one that we think we will be able to complete within this financial year,” Thugge said, without giving more details on the amount or tenor.

The government has ramped up borrowing and spending, leaving it with a fiscal deficit that peaked at 7% in the fiscal year to end-June.

Earlier, Thugge said in a presentation that the 2019-20 (July-June) budget deficit is expected to fall to 4.7% of GDP from a revised 5.8% this fiscal year. The deficit is likely to drop to 2.8% of GDP by the 2022-23 fiscal year, he said at a public hearing on the budget.

The government is likely to spend 2.81-trillion shillings in the next fiscal year, up from a revised 2.47-trillion shillings in this financial year, the official said.

In October, the IMF said Kenya’s risk of defaulting on debt repayments has increased to moderate from low, citing the government’s public investment drive and revenue shortfalls in recent years.

The treasury says the economy is expected to grow 6.2% in 2019, up from a forecast 6.0% in 2018.