Nairobi, June 23 -- Kenya is seeking to lower its cost of borrowing by committing to reduce its forest cover losses and lift electricity connections as key performance indicators in a bid to unlock at least $500 million (Sh64.7 billion) from a sustainability-linked bond (SLB) and similar debt instruments.

The coupon or interest rate paid by the government will remain unchanged if the targets are simply matched, but the finance cost will fall if they are exceeded.

Underperformance will, however, result in higher debt service costs.

SLBs give borrowers flexibility on the use of the funds but tie the cost of the debt to whether or not the key performance indicators (KPIs) are achieved.

Kenya will, for instance, see the interest rate on t...