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Kenya: Definitely, maybe

Kenya has waited nearly seven years to get its debut Eurobond issue off the ground, so why not wait a few more weeks?

There is an air of determination among leaders in Nairobi – sort of.

Last month, Kenya’s treasury cabinet secretary, Henry Rotich, declared that despite the devastating terror attacks on Westgate Mall in Nairobi – which killed 67 people and injured more than 200 – Kenya would remain on track to issue its debut Eurobond by the end of the year. In fact, international perception of Kenya has remained firm and investors still believe in its positive story. Kenya, as the latest important frontier market to issue a Eurobond, is due to do well through the issue.

Now there appears to be a slight change of plan. This month, in another announcement by Rotich, the Eurobond has been pushed back further and is now planned to go to market definitely no later than January 2014.

There is nothing wrong with waiting until January next year. But Kenya is sending the wrong message by continuously changing its "definite" plans. A Eurobond has been on Kenya’s agenda since 2007, but was put on the back-burner when the financial crisis sent interest rates into a tailspin. Since then, there have been many legitimate excuses to postpone the bond issue.

For some reason, despite the seven-year wait for the right time to issue, Kenya appears to be in a rush to do so now. Perhaps the government of Kenya feels it has something to prove after Rwanda – its much smaller neighbour, in area and economic weight – became the first to issue in the East African Community, and quite successfully at that. But Kenya has already missed out on the tight spreads that frontier markets, including Rwanda, benefited from earlier in the year.

Some of Kenya’s economic fundamentals might force spreads on the issue to be slightly wider than hoped – a twin deficit and falling foreign-currency reserves are two economic issues that the country will need to prove are under control.

But Kenya should take the time to reinforce the positives of its story to take on the road. What harm could a few more weeks do?

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