Kenya mulls onshore forex bonds to support local currency

Source: Xinhua| 2019-02-01 21:33:38|Editor: xuxin
Video PlayerClose

NAIROBI, Feb. 1 (Xinhua) -- Kenya is considering floating foreign currency-denominated bonds locally in order to support the Kenyan shilling, the country's capital market regulator said on Friday.

Paul Muthaura, CEO of Capital Markets Authority (CMA), told journalists in Nairobi that the bonds will lead to additional foreign currency inflows into the country and strengthen the local currency.

"We are proposing the onshore foreign currency bond because it will also provide government with foreign currency to cater for the growing import bill," Muthaura said during the release of ninth volume of the Capital Markets Soundness Report for the fourth quarter of 2018.

By issuing debt in foreign currency such as U.S. dollars and euros locally, Muthaura said, Kenya will solidify its position as an international financial center.

According to the Central Bank of Kenya, the country's foreign exchange reserves currently stand at 816.4 billion shillings (8.13 billion U.S. dollars), equivalent to 5.3 months of import cover.

Muthaura noted that the foreign currency debt instruments will ensure the country has adequate cover and buffer against short-term shocks in the foreign exchange market.

Luke Ombara, director of regulatory policy at CMA, said the government should also consider issuing offshore local currency bonds so as to raise funds in the international capital markets without being exposed to foreign exchange rate risks and volatility.

Ombara said that a number of developing countries such as Rwanda and India have already floated local currency bonds outside of their countries.

He noted that ideal bourses to issue offshore local currency-denominated bonds include the London Stock Exchange and the Irish Stock Exchange.

The CMA official noted that currently the amount of international funding channeled toward developing countries and emerging economies continues to grow and Kenya should take advantage of the trend to raise funds in the international capital markets to implement President Uhuru Kenyatta's Big Four Agenda on universal healthcare, affordable housing, manufacturing and food security.

Ombara noted that the adoption of an appropriate mix and balance of foreign currency debts and local currency debts will ultimately promote the development of local capital and financial markets, further positioning Kenya as the heart of African capital markets.