The United Nations Conference on Trade and Development (UNCTAD) has warned developing countries facing a high risk of debt distress against issuing more Eurobonds.

The UN agency, through its latest Trade and Development Report (April 2024), says the issuing of high-risk bonds, also referred to as non-investment grade or junk bonds, attracts high costs due to the risk premium investors demand. This, the report says, has huge implications for the debt dynamics of the affected countries grappling with low economic growth rates.

“Implicit borrowing costs, gauged by yields, are substantially above existing borrowing costs, as measured by the average weight of existing bond coupons. The difference is especially large for non-investment grade countries,” the agency says.

“Consequently, countries capable of issuing bonds do so at higher coupon rates, compared with bonds being currently repaid. This has detrimental effects on debt dynamics, especially in a context of low economic growth, and more broadly on the allocation of public spending.”

Read: Africa’s creditors come calling as debt distress looms large

Non-investment grade bonds usually carry lower credit ratings from the leading credit agencies. For instance, a bond is considered non-investment grade if it has a rating below BB+ from Standard & Poor’s and Fitch, or Ba1 or below from Moody’s.

Bonds with ratings above these levels are considered investment grade.

UNCTAD cited Benin, Côte d'Ivoire and Kenya, who had been shut out of bond markets for most of 2022 and 2023, among eight non-investment grade countries that raised $17 billion through Eurobonds in the first quarter of 2024.

On the other hand, five countries rated investment grade issued bonds for $28.5 billion.

In total, bond issuing by developing countries in the first quarter of 2024 soared to $45.5 billion, a record high for this period of the year.

In January, Cote d’Ivoire’s Eurobond attracted a subscription of over $8 billion from more than 400 investors as the country raised $2.6 billion through two bonds with tenures of eight and 13 years respectively, at single-digit interest rates.

Read: Ivory Coast bond sale gives Kenya hope of more Eurobonds market

The debt instruments carried respective interest rates of 6.3 percent and 6.85 percent for the eight-year and 13-year bonds respectively.

In February, Benin’s sovereign bond was oversubscribed by six times as demand for riskier assets in the emerging markets grew, amid expectations that the Federal Reserve will reduce interest rate this year.

The West African nation received $5 billion demand against a target of $750 million on a 14-year bond priced at 8.375 percent. In the same month, Kenya’s National Treasury issued a $1.5 billion Eurobond that was priced expensively to global investors to be able to make partial repayment of a $2 billion bond that is maturing in June and allay fears of the possibility of default.

On the new seven-year bond, the Kenyan government will pay interest at an annual rate of 9.75 percent, compared with a rate of 6.875 percent on the maturing 2014 issue.

The UN agency notes that since early 2024, sovereign bond sales for some developing countries have resumed, buoyed by a thaw in the financial markets and on the expectations of interest rate cuts in major developed economies.

“Strong bond issuance in the first quarter of 2024, though uncertainties persist for the remaining part of the year and market access remains uneven,” it says.

“The debt and development crises faced by many developing countries continues to worsen. The increase in public resources and export revenues that must be channeled towards public and publicly guaranteed debt service (to cover both the principal and interest payments) is a key dimension of the current crisis.”

According to the report, developing countries paid close to $50 billion more to their external creditors in 2022 than they received in fresh disbursements, with private creditors accounting for most of the change in the direction of net transfers.

While between 2021 and 2022 debt service to these creditors remained stable (at about $260 billion), disbursements declined by 45 percent, from over $300 billion to less than $170 billion.

This waning of private creditors’ appetite for developing countries’ public debt resulted in the lowest disbursement levels since 2011.
As a result, during this period, net transfers on public and publicly guaranteed debt from private creditors switched from an inflow of over $40 billion to an outflow of about $90 billion.

“The surge in net negative transfers is tied to a significant decrease in access to fresh financing for numerous countries,” the report says.

“This decline stems from various factors, including higher interest rates in developed countries, deteriorating global financial conditions and mounting concerns about debt distress in developing countries. This dynamic is reflected in the lowest levels of external sovereign bond issuance during 2022 and 2023 in the last 10 years, plummeting to one third of the peak reached in 2020.”

The report notes that the renewed access to market financing is a welcome development, particularly for non-investment grade countries, many of whom are at high risk of or in debt distress.

However, concerns remain regarding the sustainability and extent of market access in the outlook period.

“Overall, the deterioration of key determinants of debt dynamics underlines the structural nature of debt challenges faced by developing countries,” the report says.

According to the report, lack of progress on multilateral solutions in addressing the different components of this complex debt problem including low economic growth, profit shifting and base erosion, commodity dependence, high climate vulnerability and significant financing costs, absence of global financial safety net and effective multilateral sovereign debt resolution mechanisms further exacerbates the burdens faced by populations in developing countries in the form of larger fiscal adjustments and puts at risk the achievement of the Sustainable Development Goals. By JAMES ANYANZWA,  The East African

Mutunga was named the convener of the United Political Front (UPF) comprising of United Green Movement (UGM), the Communist Party of Kenya (CPK) and Ukweli Party (UP)/CFM/FILE - Francis Mbatha

Former Chief Justice Willy Mutunga has proposed the setting up of a commission of inquiry to probe the chopper crash that killed Chief of Defence Forces (CDF) General Francis Ogolla alongside nine others in Elgeyo Marakwet on Thursday.

The Huey helicopter crashed at 2:20 pm, shortly after takeoff, in an incident that has shocked the nation.

Mutunga said Friday that such a commission should ensure public involvement to dispel any speculations regarding the cause of the crash.

“Given the tragedy that engulfs our country now, a country of rumours and ethnic divisions, it is a good idea to immediately set up a Commission of Inquiry that has robust public participation,” he said.

“An Inquiry that is seen as a cover up is unacceptable.”

While confirming the incident, President Ruto said that the Kenya Defence Forces had dispatched a team of air crash investigators to probe the cause of the tragic air crash.

Ruto said that the Kenya Air Force personnel will lead the investigations.

“The Kenya Air Force has constituted and dispatched an air investigations team, to establish the cause of the air crash,” Ruto said, describing the incident as “a moment of great sadness for myself, as the Commander in Chief of the Kenya Defence Forces, the Kenya Defence Forces fraternity, and the nation at large.”

While describing Ogolla’s last moments, the President said that the CDF, had left Nairobi Thursday morning, to visit troops deployed in the North Rift under Operation Maliza Uhalifu, and to inspect the ongoing school renovation works in five schools. 

President Ruto disclosed that, as part of his working tour, a multi-agency team stationed at Chesitet in Baringo County, had briefed the CDF on the security situation after which he proceeded to the Kainuk Forward Operating Base in Turkana County, where he addressed troops, commending them for their resilience and operational successes.

The CDF and his entourage departed from Kainuk to Chesegon, West Pokot County, where he launched the rehabilitation of Cheptulel Boys High School.

He was departing Chesegon for the Recruits Training School in Uasin Gishu County, where he was scheduled to inspect construction facilities at the institution when the crash happened.

The President identified other KDF personnel who died alongside Ogolla as Brigadier Swale Saidi, Colonel Duncan Keittany, Lieutenant Colonel David Sawe, Major George Benson Magondu, Captain Sora Mohamed, Captain Hillary Litali, Senior Sergeant John Kinyua Mureithi, Sergeant Cliphonce Omondi, and Sergeant Rose Nyawira. By Bruhan Makong, Capital News

NAIROBI, Kenya, Apr 20-Opposition Chief Raila Odinga says the late Chief of Defence Forces Francis Ogolla would never have thought about going to the Bomas of Kenya to force former Independent Electoral and Boundaries Commission (IEBC) chairman Wafula Chebukati to alter the election results of the 2022 general election.

Speaking during General Ogolla’s memorial service at the Ulinzi Sports Complex, Odinga said that he knew General Ogolla “very well” and there is no way he would have taken such a decision.

Odinga said that a time had come for all his accusers to let the matter rest and allow the late CDF who perished alongside nine others following a helicopter crash on Thursday in Elgeyo-Marakwet to rest peacefully.

“As we lay General Ogolla to rest, I want us to remove the stigma,” he pleaded.

General Ogolla was among senior government officials named by Chebukati in August 2022, whom he claimed wanted to subvert the will of the people at the Bomas of Kenya during the announcement of the Presidential results.

Chebukati said at about 10am of the said date, the National Security Advisory Committee (NSAC) members came to see him alongside other commissioners at the national tallying centre at Bomas, and asked him to ensure a runoff, if he couldn’t declare Raila Odinga as the outright winner in the 2022 presidential election.

In his affidavit he listed the names of the NSAC delegation that were represented at the said meeting, including former Principal Administrative Secretary at the office of the ex-President Uhuru Kenyatta, Kennedy Kihara ex-Solicitor General Kennedy Ogeto, ex- Inspector General of Police Hillary Mutyambai and Ogolla who was the Vice Chief of Defense of Forces at the time.

In his narration, Chebukati claimed that prior to the arrival of the team, he had received a call from the Head of Public Service Joseph Kinyua informing him that he had sent a team that would like to discuss “assumption of office”.

The IEBC Chairman noted that the message was relayed by Kihara, who cautioned that if he declared William Ruto as the President – Elect, ‘the country is going to burn.’ 

He proceeded to indicate that skirmishes between the Kikuyu and Luo communities had already started ‘in several slums including Kibera and Mathare’ on the basis of alleged ‘betrayal by the kikuyu’.

“The second part of the message from the NSAC delegation was that if we cannot announce Raila Odinga as the outright winner, then we must ensure that there is a runoff,” Chebukati submitted.

However, NSAC denied the claims

In his replying affidavit, the former Head of Public Service Joseph Kinyua admitted that officials met the electoral body but to only address security concerns raised.

‘I categorically deny the second respondent’s insinuation that I arranged a meeting between him and members of the NSAC with a view to influencing the outcome of the presidential election held on August 9, 2022, in favor of a particular candidate,” Kinyua stated in the affidavit filed in court, in response to Chebukati”s explosive dossier submitted to the Supreme Court.

The meeting with the Commission, he pointed out, was at the Bomas of Kenya where “members of the public were present together with various political parties, party agents and even the candidates themselves.”

“Had the intention of the NSAC been as sinister as sought to be portrayed in the affidavits, the subject of this response, the meeting would not have been requested and held at such an open and public venue with all the commissioners present,” his affidavit read.

President Ruto himself had accused the late CDF of attempting to rob him of his victory.

On May 2023, President Ruto said he appointed Ogolla to the position of Chief of Defence Forces despite having been among the high-ranking individuals who attempted to overturn his 2022 presidential victory in Bomas of Kenya. 

Ruto said during a joint interview that he appointed Ogolla as the military chief based on his merit.

The Head of State said that he made the decision consciously against the advice of many people who had asked him to stop General Ogolla from succeeding former General Robert Kibochi who retired last month and to avoid “rewarding such kind of behavior.”

“I appointed General Ogolla, he is among the people who went to Bomas to try and overturn my victory. But because when I looked at his CV, he was the best person to be the General,” Ruto said.

President Ruto stated that he had the choice to appoint anybody into the CDF position noting that his appointment has nothing to do with him having been the Deputy CDF but “good track record.”

“I could have appointed anybody, I had I think 10 choices,” he added.

Before appointing Gen Ogolla, Ruto said that he called him and assured him that he would give him the job despite trying to sabotage his victory.

He adds that when he spoke to Gen Ogolla, the new CDF admitted to him having made a mistake and told him that he would respect his decision.

“He (Gen. Ogolla) told me I have no defense, you do with me whatever you want, I cannot defend, it was wrong, what I did was wrong,” Ruto said at the time.  By Bruhan Makong, Capital News

The Ugandan government has tabled a loan request of US$117.26 million (Shs446.7 billion) to be borrowed from Standard Chartered Bank to finance the construction of the Kitgum-Kidepo road.

The Minister of State for Finance, Planning, and Economic Development (Planning), Amos Lugoloobi, tabled the request during the plenary sitting on Thursday, April 18, 2024.

Speaker Anita Among noted that government has been improving tourism roads across the country to boost revenue generation from the sector.

“There is a need for us to work on tourism roads, and today we will receive a proposal to borrow money to finance a tourism road from Kitgum to Kidepo. This road, if constructed, will boost tourism in the Northern part of the country,” she said.

Among also expressed concern about the lengthy approval process for the loan, which has taken over a year and a half, resulting in the accrual of fees such as commitment fees.

“How can a loan take over a year in the approval process when all the feasibility studies have been done? The time value of money should be considered,” she said.

The Attorney General, Kiryowa Kiwanuka, acknowledged the concern but explained that delays are sometimes caused by the need for further and better particulars to ensure efficiency.

“Besides the time taken to negotiate the loan, the most important thing is that you need to get the right information from the necessary entities,” he said.

The Minister of State for Works, Musa Ecweru, highlighted the challenge of outdated road designs resulting from the delay.

Lugoloobi stated that they have evaluated the value chain of loan acquisition, approval process and actual implementation and evaluation of performance, noting serious concerns.

Speaker Among referred the proposal to the Committee on National Economy for consideration.

Meanwhile, the minister also tabled a supplementary request worth Shs1.106 trillion for consideration by Parliament.

The supplementary expenditure Schedule No. 2 for financial year 2023/24 was tabled according to Section 25 of the Public Finance Management (Amendment) Act (2015), which stipulates that the total supplementary expenditure requiring additional resources over and above what is approved by Parliament shall not exceed 3 percent of the total approved budget for that financial year without the approval of Parliament.

It also states that where funds are expended under subsection (1), supplementary estimates showing the sums spent shall be laid before Parliament within four months after the money is spent.

According to the breakdown, the bulk of the money, Shs 578 billion was spent on settling the offtake arrangement between the government and DEI Pharmaceuticals; Shs125 billion for settling wage shortfalls, and pension and gratuity shortfalls.

Others include State House Shs18.6 billion; Office of the Prime Minister Shs9.4 billion; and Ministry of Finance Shs37.6 billion.

The supplementary schedule was referred to the committee on the budget for consideration. APA News