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{
    "id": 431944,
    "url": "https://info.mzalendo.com/api/v0.1/hansard/entries/431944/?format=api",
    "text_counter": 191,
    "type": "other",
    "speaker_name": "",
    "speaker_title": "",
    "speaker": null,
    "content": "bonds--- It will be actually a Euro bond. This means it will be priced in currencies other than the Kenya shilling. We are very lucky as a country because this is the best time in terms of macro-economic environment to float a sovereign bond. For those of us who understand bond pricing, there is an inverse relationship between bond prices and interest rates. If you look at Europe today and the USA, they are partially in a liquidity trap, meaning, therefore, that interest rates and inflation are almost near zero. There is no better time to float a bond than when you have a situation where a zone or an area is in a liquidity trap. But we have to be careful; we need to move with a lot of speed because if you watch anything economics around the world, it is the European Central Bank which is already talking about quantity leasing, meaning they want to start doing something to raise interest rates. Hon. Speaker, why do we want to float a bond in the first place? First of all, we need the proceeds from this bond. More importantly, if we were to float a bond today outside this country, there would be obvious things that our country or anybody would tell you about. In our country today the market is crowded, because the Government is competing with foreign and local investors to borrow from local banks. Therefore, immediately we get some money and the Government moves out of the domestic market, demand for loans will go down; the interest rates will also go down. We also know that it is a fact that our Government today owns about Kshs52 billion of syndicated loans across different banks; that is putting a lot of pressure on the borrowing across our country. Hon. Speaker, if we were to get the proceeds and pay loans, the Government would save a lot of money. That is what we have been talking about for so long. We have a high debt ratio; this debt is very expensive. An hon. Member stood here and said that if we were to float a bond in Europe today, we would not gain anything as a Government in terms of reduced interest rates. Hon. Speaker, in the USA there is a chunk bonds - forget about the sovereign bonds; they are trading at about 6 per cent. Therefore, assuming that our country had part of the chunk, we would still enjoy 6 per cent interest rates. I think that would be a big benefit. The other benefit is the reputation that we get. I think we are getting into these markets very late. The first bonds were traded in 1600 and the first country to trade in them was Britain to finance the war against France. We need to move our country. It is unfortunate that at this time, we are going to be in the bond market outside this country; we need to move very fast and be represented there. Hon. Speaker, I also want to speak on Anglo Leasing. These bonds and Anglo Leasing are not mutually exclusive. If you know how bonds are priced, you cannot expect to sell and get a good price as a country, and get a lot of proceeds that would support our Budget without clearing the small debts that we have. Default risk is one of the things that are priced in the bond market. Therefore, we have to pay this thing so that our bond can fetch a high premium. Then we can have a lot of money to do things like the Constituencies Development Fund (CDF) and everything else we are talking about. Therefore, I want to go on record saying that as country there are just a lot of benefits that we get. In fact, if you look at the saving in interest rates alone--- If interest rates were to be reduced by a mere 2 per cent, our country would save about Kshs20 The electronic version of the Official Hansard Report is for information purposesonly. A certified version of this Report can be obtained from the Hansard Editor."
}