News Column

Unplanned Spending Risk in Eurobond

June 22, 2014

Lola Okulo

The government must scrutinise public spending to pre-empt misuse of funds raised through sovereign debt, according to regional risk consultancy Liaison Group.

The firm's managing director Tom Mulwa said other outlying factors like insecurity pose the biggest risk to successful implementation of projects intended to benefit from the Eurobond funds.

"If we maintain a high appetite for spending, it will erode anticipated gains from the Eurobond," Mulwa said.

Kenya will accept up to $2 billion (Sh175 billion) from the Eurobond offer which has recorded a four-fold subscription ($8 billion worth of bids) from foreign investors. This is seen as an endorsement for the country as a good investment destination.

The government should ensure the goodwill is not eroded through misuse of funds to be raised, according to Mulwa. The National Treasury must therefore embark on cost management initiatives and avoid diverting the funds away from intended purposes.

Proceeds from the bond will go towards financing various infrastructural projects and repayment of a $600 million loan due in mid August.

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Source: AllAfrica

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