There’s been a lot of talk and banter flying around newsrooms in the last couple of weeks about the Eurobond (Elephant in the room if you may). I’ll try and paint that very grey area black and white (read zebra and not a painted donkey).

First things first: The Billion ‘Euro’ Question – What’s a Eurobond?

It is an international bond denominated in a currency NOT native to the country it is issued. It is then traded in the global market in order to pool a large investor base. In case you were wondering,it has nothing to do with the currency (Euro) or Europe the continent.

These bonds are categorized by currencies in which they are denominated and are normally issued by governments (like the Kenyan case), private organizations or international syndicates who are in need of FOREIGN DENOMINATED CURRENCY for a SPECIFIED DURATION.

Just to elaborate the above by using a local example. If Bidco Africa wanted to establish a manufacturing plant in India and is in need of financing to raise capital to start the venture, then the Eurobond becomes an option.

Bidco Africa may go the Eurobond way by issuing a Rupee-denominated bond locally. The (local) investors with this particular currency will purchase it and the capital raised will finance the expansion. This particular bond is christened EURORUPEE bond.

Having that in mind, then the Kenyan scenario becomes easier to fathom. The government managed to raise USD 2 billion  at the close of 24 June 2014 (Fact:It was oversubscribed by 400%).

This particular sale was in 2 sets i.e USD 500 million  of 5 year bond at 5.875% and USD 1.5 billion of 10 year bond at 6.875%.

Out of the entire amount raised, USD 600 million was used to pay up a syndicated loan that had become due. The rest was used to meet budgetary shortfalls which included financing some infrastructure projects.

The question that I ask myself is how best should such amounts have been utilized to spur economic growth and eventually development?

You need to stick around and find out on the next piece.

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