(Bloomberg) -- Kenya plans to raise $500 million through a debut bond sale in China as it seeks to widen its funding pool from foreign sources, according to people familiar with the plans.

The sale of the so-called panda bond is planned to take place in the fiscal year commencing July 1 and will  be used to finance its budget deficit, said one of the people, who asked not to be named as they are not authorized to speak.

The deal is in early discussion, and the amount and issue time could change, the people said.

The East African nation is targeting a budget deficit of 3.9% of gross domestic product for the year through June 2025 and 3.3% for both 2025-26 and 2026-27.

The nation also plans to engage the Asian Infrastructure Investment Bank to provide guarantees to support the issuance of the renminbi-denominated bond, one of the people said. The nation’s cabinet in January approved its membership of the multilateral lender. 

Kenya’s Treasury didn’t respond to requests for comment.

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The nation, encouraged by Egypt’s sale of Africa’s first sustainable panda bond in October, guaranteed by the African Development Bank and AIIB, has been on a drive to expand funding sources since returning to international capital markets in February with the issue of a new eurobond.

Egypt’s issue of a three-year bond that raised 3.5 billion yuan ($484 million) priced at 3.5% set “a template for other African countries to follow,” according to a research note by HSBC Holdings Plc. China’s Panda bond market is gaining momentum and attracting new issuers thanks to lower funding costs and a policy push, HSBC said.

Kenya’s also planning to issue a $500 million so-called Samurai bond in Japan and debt-for-nature, debt-for-medicine and food-security swaps.

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