Kenya has embarked on a fresh drive to raise funds through a syndicated loan, just days after closing a similar $500 million (Sh70.8 billion) deal arranged by a consortium of banks.

Documents seen by the Business Daily reveal that the government is looking to raise as much as $1.0 billion (Sh141.5 billion) through the facility to be arranged by the Trade and Development Bank (TDB).

In a change of tack, the Treasury is exploring the use of a credit insurance cover for the new syndicated loan to boost appetite from global commercial banks and increase its chances of success.

The insurance cover comes against the backdrop of the downgrade in the ticket size for the recently concluded syndicated loan by $100 million (Sh14.2 billion), in the wake of modest appetite shown by banks.

“TDB will arrange a new US dollar loan for Kenya in the new fiscal year which began on July 1st, 2023. The loan is expected to launch within the next month (August 2023). The government is eyeing credit insurance cover for the loan with hopes of boosting commercial bank participation,” the documents state.

The new loan comes weeks after Kenya received a Sh70 billion syndicated loan from a consortium of lenders, among them Citibank, Rand Merchant Bank, Standard Chartered and Standard Bank.

Syndicated loans are becoming the preferred choice of the government given the global spike in interest rates triggered by the US Federal Reserve that has made it very costly for developing countries to raise money from the global debt market.

Kenya’s public debt stood at Sh9.6 trillion as at the end of April 2023 and President William Ruto’s government plans to borrow an additional Sh718 billion in the current financial year to plug the budget deficit.