Govt Proposes 15% Tax on Foreigners Seeking to Loan Kenya Via Infrastructure Bond Subscription

The government has proposed a new tax for foreign investors seeking to loan the country through subscription of crucial government securities. This move is set to boost Kenyan shilling.

In its report, the National Treasury has proposed a 15 per cent tax on interest for investors who subscribe to the central bank’s infrastructure bonds.

Infrasture bonds are government securities issued by the Central Bank of Kenya to attract investors who provide long-term loans for infrastructural development.

They are mostly issued by developing countries which are always in high demand for infrastructural developments such as the construction of roads, railway lines and even ports.

The Central Bank of Kenya


KO Associates

According to experts, the new move by the government could immensely impact the shilling which majorly relies on the foreign currency inflows.

By subscribing to the infrastructure bonds, investors utilise their dollars to purchase the government securities thus boosting the local currency.

One of the main reasons the shilling has been gaining for the past three months is because of the oversubscription of the treasury bonds issued by the government earlier this year.

This helped the shilling which had hit the 160-unit mark against the dollar into consecutive gains that saw it strengthen to trade at 131 against the greenback.

The tax-free securities which in recent years attracted several offers from foreign investors could see the national treasury struggle to attract potential financiers if the proposed law is passed.

In most cases, the infrastructure bonds are always oversubscribed even up to four times the amount sought to be raised by the central bank.

The oversubscription of the lucrative papers is always attributed to their tax-free nature and high-interest returns received by the investors.

Besides the impact on foreign investors, the infrastructure bond will also attract a 5 per cent tax on interest from local investors.

According to reports, the move is in line with the recommendations of the International Monetary Fund (IMF) to help Kenya increase its revenue through widening net tax for taxpayers.

The last time the government announced the issuance of treasury bonds was in February this year when the central bank sought Ksh70 billion.

The bonds received several offers that amounted to Ksh241 billion, an oversubscription that was attributed to investors’ confidence in the country’s monetary policies.

CBK Governor Kamau Thugge speaking at the Africa Climate Business Forum on November 2, 2023



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