(Bloomberg) -- Kenya plans to go ahead with a Eurobond sale at possibly the worst time in years.

The government still intends to raise $1 billion before the end of June, Treasury Secretary Ukur Yatani told reporters in Nairobi on Thursday. His remarks came days after his department expressed concern in a document that rising global yields meant borrowing might be too expensive at this time. 

The plan is still on, Yatani said. “We’re issuing, because it’s part of financing” plans for the 2021-22 fiscal year, he said.

East Africa’s largest economy is struggling with a budget deficit equivalent to about 8.1% of gross domestic product in the year through June. The deficit came about as President Uhuru Kenyatta’s government continued spending on projects to boost farming, housing, manufacturing and health care amid the coronavirus pandemic that hit households and businesses.

Kenya raised $1 billion in 12-year bonds last year priced at 6.3%, and turned down $4.4 billion in orders. In March, Nigeria, Africa’s largest economy, raised $1.25 billion in after investors placed orders for three times the issued amount. The seven-year bond was priced to yield 8.375%.

Kenya’s timing for the new bond is poor given the backdrop of global rate tightening, widening deficits, investors’ concerns about its debt position, as well as elections scheduled for August, according to said Churchill Ogutu, a Nairobi-based economist at IC Group.

Disruptive events, including Russia’s invasion of Ukraine and Covid-19 lockdowns in China, have further complicated investment plans around the world.  

Back and Forth

“The National Treasury will have to bite the bullet of an issuance at a higher cost,” Ogutu said. “The alternative is to not issue, and scale down the budget in commensurate fashion, but that wont really fly in an electioneering year.”

The Treasury posted a document on its website last month in which shelving the Eurobond sale was under consideration due to prevailing high interest rates. The report was later pulled down when Bloomberg called to inquire about the reversal in plans.

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“This back and forth is unlikely to reassure investors, and sovereign dollar bond yields are likely to climb higher, setting the scene for unfavorable coupon terms,” said Virag Forizs, Africa economist at Capital Economics.

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