CBK
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Kenya is grappling with a renewed crisis of investor confidence following violent protests that forced the government to abandon proposed tax increases.
The demonstrations, which began in June against a finance bill and later broadened into wider anti-government protests, have significantly dampened investor interest in the East African nation. The Central Bank of Kenya's recent attempt to sell the FXD1/2023/02 bond illustrates the severity of the situation. Aiming to raise Sh20 billion, the bank received bids worth a mere Sh487.5 million, representing just 2.44 percent of the target. Despite this underwhelming response, the CBK managed to secure 16.973 percent of its overall goal. Adding to Kenya's economic woes, the value of foreign currency loans and deposits held in local banks has seen a substantial decrease.
In the quarter ending March, these holdings fell by Sh504.9 billion, primarily due to the strengthening of the Kenyan shilling. This decline has somewhat alleviated concerns about banks' exposure to external risks, as foreign currency deposits dropped from Sh1.91 trillion to Sh1.63 trillion, while foreign currency loans decreased from Sh1.21 trillion to Sh990.2 billion. The banking sector has found some respite amidst these challenges as highlighted by the International Monetary Fund's recent observations.
The IMF notes that as of September 2023, Kenya's total foreign currency liabilities stood at 34.9%, exceeding the 31.6% median for emerging and developing economies. However, the fund also reports a nominal increase in hard currency deposits even after accounting for exchange rate depreciation, indicating improved foreign currency liquidity throughout 2023. Efforts to stabilize the Kenyan shilling through various reforms and interventions have contributed to bolstering foreign currency liquidity with expectations of further improvement in 2024.
Nevertheless, the cost of insuring Kenya's debt against default has risen sharply, reaching approximately 551 basis points – the highest level since February 13. This surge has effectively reversed the progress made since the refinancing of a Eurobond that had previously raised concerns about potential default. Kenya's current debt challenges can be traced back to a period of rapid infrastructure development in the early 2000s. Significant investments in roads and railways during this time fueled economic expansion but also contributed to the country's mounting debt burden.
Comrades,
'refinancing of a Eurobond'?
This money disappeared without trace, why is the public liable to pay?
All they need is arrest all involved and recover ,right? Lol...