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Kenya to Hold Policy Rate Before Inaugural Eurobond Offer

Kenya’s central bank will probably leave its key lending rate unchanged for a fourth consecutive meeting to ensure the economy is stable as the government prepares to sell the country’s first Eurobond by next month.

The Monetary Policy Committee, led by Governor Njuguna Ndung’u, will hold the benchmark interest rate at 8.5 percent, according to nine out of 11 economists surveyed by Bloomberg. The others forecast a 25 basis-point cut. The central bank will announce its decision this afternoon by e-mail.

“The central bank would not want to create impact on the shilling or inflation rate, which are both currently stable, when it plans to issue the Eurobond soon,” Vimal Parmar, head of sub-Saharan Africa research at Nairobi-based Burbidge Capital Ltd., said in a phone interview. Any fluctuations in the economy could potentially push up bond yields, he said.

After a series of delays since September, Kenya is completing the paperwork to offer of its maiden Eurobond, in which it targets to raise as much as $2 billion this month or early February, Treasury Secretary Henry Rotich said last week.

The country is well-placed for the sale after recording “remarkable” economic progress over the past few years, International Monetary Fund Managing Director Christine Lagarde said on Jan. 6 during a visit to the country.

Easing Halted

Kenya halted its monetary-easing cycle in July, after cutting the key lending rate twice last year to help spur an economy that’s forecast by the International Monetary Fund to expand 6.2 percent this year from as much as 5.9 percent last year. Lower pressure on food prices on the back of good rains has helped slow inflation, with consumer prices declining for a third month to 7.2 percent in December. The central bank targets the rate at between 2.5 percent and 7.5 percent.

The shilling strengthened a fifth day, adding less than 0.1 percent to 86.30 per dollar by 9:42 a.m. in the capital, Nairobi, heading for its highest level this year and taking its advance since the start of January to 0.2 percent.

Kenyan President Uhuru Kenyatta said he’s requested an “insurance-type” credit arrangement from the IMF to cushion against economic shocks after the country received its final installment in December of a three-year, $750 million Extended Credit Facility from the Washington-based lender. The government needs funding to tap into when necessary as the economy is “vulnerable” to external threats, Kenyatta said.

To contact the reporter on this story: David Malingha Doya in Nairobi at dmalingha@bloomberg.net

To contact the editor responsible for this story: Nasreen Seria at nseria@bloomberg.net

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