Ruto Adopts New Model for Borrowing Foreign Loans

Ababu Namwamba.
President William Ruto signs an executive order on September 13, 2022, at State House Nairobi. Looking on are Davis Chirchir (left) Ababu Namwamba and Deputy President Rigfathi Gachagua.

The Kenyan government through a notice made on Monday, April 17, announced the return to the international market to raise money amid the biting cash crunch.

Through Treasury, President William Ruto’s administration announced it would seek to raise money through the issuance of international sovereign bonds.

A sovereign bond is a debt security issued by a government to raise money to fund state programmes, pay down old debt, pay interest on current debt, and any public expenditure needs.

Ruto took a different path from his predecessor Uhuru Kenyatta and sought a financial institution to negotiate on behalf of his administration.

Treasury CS Njuguna Ndung'u during a meeting with UN officials at his office on February 24, 2023.
Treasury CS Njuguna Ndung'u during a meeting with UN officials at his office on February 24, 2023.
The National Treasury


“The Government of the Republic of Kenya through the National Treasury is considering accessing the international capital markets before the end of the fiscal year 2023/24 (July 1, 2023, to June 30, 2024) to issue a sovereign bond.

“The National Treasury request for Expression of Interest (Eol) from reputable financial institutions to provide comprehensive Lead Manager services to successfully accompany Kenya's return to international capital markets,” the Treasury stated.

According to the government, the Lead Manager must be duly licensed to operate in North America; and/or Europe; and/or Middle East; and/or Asia. spoke to Vincent Kimosop, an economist on what this means to the country, whose ballooning debt remains a major concern. 

“What the government is simply doing is seeking to borrow from the international market to supplement what it is being received through revenue collection,” he explained.

On why the need for a Lead Manager, he expounded, “In the previous administration, the government directly floated bonds in the international market like in the case of Eurobond.”

“In this case, Ruto’s government is being more prudent in seeking for expertise and scope before it borrows,” he added. 

According to the government, the Lead Manager will advise the National Treasury in determining the most appropriate timing, format, amount, tenor, coupon, all-in-cost, and other relevant terms and conditions for the issuance of an international bond.

Furthermore, the Lead Manager will liaise with potential investors and manage the book-building process for the offering as well as prepare legal documents and agreements during the process.

Ruto in his inaugural speech to the parliament on September 29, 2022, announced that the government would limit on borrowing.

In 2022, we budgeted to borrow Ksh900 billion to finance both development and recurrent expenditure. 
“The Government should never borrow to finance recurrent expenditure. This is not right, prudent or sustainable, it is simply wrong. We must bring ourselves back to sanity,” the President stated back then.

On whether Ruto was negating his promise, Kimosop remarked, “I do not think so. It is almost impossible for a government to run without borrowing. What is important is if there will be accountability for the borrowed cash.”

President William Ruto addresses the parliament on September 29, 2022.
President William Ruto addresses the parliament on September 29, 2022.
Photo: PSC