Kenya has secured $500 million (Ksh70.48 billion) from five international banks to pay for ongoing development projects that were approved in the just-finished fiscal year.

The lenders said in a statement released yesterday that the facility is divided into two tranches of three and five years, as previously disclosed, although they did not reveal the specific sums allotted to each tranche.

“Mandated by the Government of the Republic of Kenya as Bookrunners and Initial Mandated Lead Arrangers, are pleased to announce the successful closure of a USD500 million 3-year and 5-year Syndicated Medium Term Loan (the “Facility”),” the lenders said in a statement.

The National Treasury in March mandated CitiGroup, Standard Chartered Bank and Standard Bank, Rand Merchant Bank which were later joined by Afrexim Bank to arrange the facility.

“The proceeds from the facility will be used by the National Treasury to finance the development projects as per the development budget approved by the Kenyan Parliament for the Fiscal Year 2022/2023,” the banks said.

The interest rates of the five year and three loan was not disclosed but syndicated loans are usually higher since they are based the floating SOFR which has now replaced the Libor. “You need to add +75bps now, considering the benchmark rate for syndicated loans is SOFR(Secured Overnight Financing Rate) which has climbed by that margin in lockstep to US federal funds rates which is now at 5 percent,” said Churchill Ogutu, economist at IC Group.

Even with the addition of a fifth arranger, the State was unable to reach its initial goal of $600 million, which highlights the challenging external debt market.\From t

is market, the government expects to raise a net Sh199 billion during the current fiscal year while also paying for the rollover of the maturing Sh281 billion Eurobond.

Kenya is running a tight budget given that it has mainly been able to access very expensive loans with bonds in the domestic market attracting rates of over 15 percent even as it remains locked out of the Eurobond market due to the volatile market conditions.