IMF, Kenya Reach Agreement
Kenya to have access to an additional $244M
π Welcome to The Mwango Weekly by Mwango Capital, a newsletter that brings you a succinct summary of key capital markets and business news items from East Africa.This week, we cover IMF support and the bond markets.First off, enjoy our weekly business news in memes:
IMF, Kenya Conclude Third Review
$244M in Credit: The IMF has concluded the third review of Kenya's 38-month $2.34B financing package - unlocking a $244M credit line from the Fundβs Extended Fund Facility and Extended Credit Facility. Kenya has so far drawn $1.178B from the package. The amount outstanding is $1.1B. [IMF]
Reforms: Publication of beneficial ownership information for successful bidders in government tenders and State-Owned Enterprises [SOE] reforms are areas the Fund has highlighted in the review. Kenya's financially-troubled State-Owned Enterprises continue to impose costs on the Exchequer. The latest report on Kenyaβs Public Non-guaranteed Debt shows that 9 select SOEs have a cumulative KES 104.8B in public non-guaranteed debt (0.1% of GDP), with KPLC, KenGen, and KPC constituting over 82.4% of the debt.
Africa Outlook: IMF has revised Africa's growth downwards to 3.8% from 4.5% and projected regional inflation at 12.2% in 2022 and 9.6% in 2023. Prices for food - accounting for about 40% of Africa's spending - are expected to rise further. With a wheat import load of 85%, the ongoing Ukraine invasion adds supply uncertainty. Tanzania imports over 70% [Kenya: 33%] of wheat from Russia and Ukraine. Higher fuel and fertilizer prices are also expected to further complicate domestic food production with the region's oil import bill set to rise by $19B on rising crude prices. [IMF]
Bond Markets
Canceling $1B Eurobond?: The National Treasury is mulling canceling plans to go to the international capital markets for a $1B Eurobond in the fiscal year ending June 2022 citing rising interest rates that would make the debt expensive. [Bloomberg]
EABL Bond Interest: This week, EABL announced its first interest payment to holders of its KES 11B 5-year Medium Term Note that was issued in Oct 2021. The interest coupon of 12.25% payable semi-annually will see bondholders earn KES 673.8M in interest. [Mwango Capital]
Ailing Corporate Bond Market: The latest Quarterly Statistical Bulletin (QSB) by the Capital Markets Authority shows corporate bond turnover hit a decade-low in 2021, accounting for 0.09% [KES 851M] of total bond turnover. Treasury bond turnover accounted for 99% [KES 956.13B]. In Q1 2022, bond turnover for corporate and treasury bonds came in at KES 1B and KES 190.95B respectively, highlighting investor interest in public debt securities and crowding out of the private sector by the government in the debt markets. [CMA]
May Treasury Bond Issues: The CBK will be in the domestic debt markets in May seeking to raise KES 60B. The vehicles will be a new 10-year fixed coupon bond [FXD1/2022/10] and a reopened 25-year fixed coupon bond [FXD1/2021/25]. The CMA QSB for Q1 2022 shows that the equity market has long trailed the bond market in turnover.
What Else Happened This Week?
WPP ScanGroup FY 2021: In a year that it reversed its Profit Before Tax position from KES -1.4B to KES 134M, net profit reached KES -37.9M from KES -1.7B. Revenues rose 19.8% to KES 7.6B. The firm will not pay a dividend in FY 2021 [2020: Nil]. [Mwango Capital]
Dollar Shortage: Earlier this week, reports showed banks were imposing limits on USD purchases citing regulatory directives to ration the US currency. The Kenya Bankers Association highlighted that there was enough FX to meet market demand. [Mwango Capital]
Inflation Watch: April 2022 inflation came in at 6.47% compared to 5.76% in April 2021. In YoY terms, the Food and Non-Alcoholic Beverages index rose the most by 12.5% while cooking oil rose by 41.66%. [KNBS]
Bitcoin is Legal Tender in CAR: The Central African Republic, a country of 5.9M people and a GDP Per Capita of $411 [PPP: $929] became the maiden country in Africa to adopt Bitcoin as legal tender and the second globally after El Salvador. [Bloomberg]
Interest Rate Watch
Botswana: Monetary authorities in Gaborone raised the Monetary Policy Rate (MoPR) by 51 bps from 1.14% to 1.65% yield on the 7-day Bank of Botswana Certificate. [Bank of Botswana]
Charts of the Week
Summary of the NSEβs performance last week.
Rising Food Insecurity in Africa
