Kenyan government might soon face challenges raising money in the international markets following reports that advisers have urged foreign investors to drop the country's international bonds and instead opt for Angola.
This could be a problem for the government which is already borrowing at higher interest rates in the domestic and international markets.
Bloomberg on Wednesday, 26 July, reported that American investment bank Morgan Stanley has cautioned its customers against buying Kenyan assets as opposition mounts pressure on the government which has seen businesses close, reducing the State's ability to collect taxes.
Morgan Stanley, which raises money for institutions including companies and governments, has directed its customers to buy Angolan bonds instead following the recent currency devaluation, Bloomberg reported.
“Strategists are turning less bullish on Kenya’s international bonds as recent social unrest forces businesses to close, threatening tax revenue and spurring fiscal risks.
“At the same time, they are upgrading their view on Angolan notes due to signs of a more stable currency, improved fiscal dynamics and attractive valuations,” the report read in part.
Led by Neville Mandimika, Morgan Stanley’s Emerging Markets Sovereign Strategist, the group noted that they were shunning Kenya for Angola, citing cheaper valuations in the Southern African country.
“We now prefer Angola’s long end relative to the Kenyan long end given the balanced outlook for the former and the downside risks for the latter,” the strategists explained why they were not keen on loaning Kenya.
In May 2023, Moody’s, a global rating agency, downgraded Kenya’s financial ratings from B2 to B3. The B3 rating warns investors and lenders that Kenya is highly likely to default on its loans.
The government was also said to be unable to finance its credits amid an economic crisis and high living conditions.
The rating came a few months after Kenya, in December 2022, sought to raise Ksh128 billion through external commercial financing from international banks.
Additionally, the Treasury announced that 2023/2024 budget will be financed through Ksh3 trillion revenue collection and an additional Ksh718 borrowed from local and international lenders.
Of the amount to be borrowed, Kenya will seek to raise Ksh131 billion from external financing, including floating international bonds and acquiring loans.
