The National Treasury is gearing up to launch the second tranche of a bond issuance this week, with the aim of raising Sh28 billion to carter for pending bills owed to oil marketers.

This move comes as part of the government’s ongoing efforts to clear a substantial Sh45 billion ($450 million at the time) debt burden owed to the oil marketers based in Kenya

The first tranche of the bond, which was issued earlier, had a target of $150 million (Sh15 billion at the time), but it exceeded expectations with an over-subscription of Sh3.5 billion hence the tap sales.

“As a follow up to our communication below, please find attached the prospectus for the bond that you shall be subscribing to once it opens up for tap sales,” read the communique from the regulator.

The Sh45 billion debt owed to oil marketers was initially incurred through unpaid subsidies, as a means to alleviate the government’s financial strain, but this has since been converted into a three-year bond, providing a more viable path to repay the outstanding dues, while ensuring the stability of the oil marketing sector.

By floating the second tranche of the bond, Treasury aims to further address the remaining $280 million of the debt. The successful subscription of the first tranche is likely to encourage strong investor interest in the upcoming bond issuance.

The Treasury’s decision to raise funds through bond issuance provides a win-win solution for both the government and oil marketers. The conversion of the debt into a bond allows the government to manage its financial liabilities effectively, ensuring stability and providing a clear timeline for repayment.

On the other hand, oil marketers will receive their long-overdue payments, thereby alleviating their financial challenges and facilitating smoother operations within the industry. The resolution of these pending bills is expected to inject liquidity into the oil marketing sector, which will have a positive cascading effect on related businesses and the overall economy.

The successful completion of this bond signals the government’s commitment to honouring its financial obligations and bolstering investor confidence.

This however comes at a time when the government is rapidly accumulating debt since the Ruto administration came to power, with an estimated borrowing of over Sh200 billion a month.

Last Thursday, Kenya was also able to raise a Sh70.4 billion syndicated loan from a consortium of lenders with the amount set to fund development projects sanctioned in the last fiscal year.