Kenya will postpone accessing a $1.5 billion UAE loan to align it with its budget for the current financial year. The country is dealing with high debt service costs and is in talks with the IMF for a new lending program. Recent financial strategies include issuing a $1.5 billion bond and awaiting over $950 million from external sources by June.
Kenya’s Finance Minister, John Mbadi, announced that the country will delay accessing a $1.5 billion loan from the UAE until it aligns with its budgetary framework. The decision comes as Kenya grapples with rising debt service costs from previous borrowing efforts and aims to stabilize its financing. Ongoing negotiations with the International Monetary Fund will address a new lending program after the current one ends in April.
The government has recently issued a new 10-year dollar bond, also valued at $1.5 billion, to cover upcoming maturities. By June’s end, Kenya expects to secure over $950 million from various external sources, including the World Bank and the African Development Bank. Mbadi emphasized the need to evaluate the fiscal gap before drawing funds from the UAE loan.
Kenya’s borrowing strategy has shifted recently as it seeks alternative funding sources due to tighter lending from China and rising Eurobond yields. Since taking office in October 2022, President William Ruto has pursued closer trade relations with the UAE. The recently organized UAE loan, agreed upon last year, carries an interest rate of 8.25% and is scheduled for repayment in three $500 million installments in 2032, 2034, and 2036.
Mbadi noted that the funds could be utilized for liability management or direct budgetary support. Of the newly issued $1.5 billion bond, $900 million will be appropriated for buying back a maturing Eurobond from 2027, while the remainder will be allocated to repay falling due syndicated loans.
Overall, Kenya’s cautious financial approach illustrates an effort to balance immediate funding needs with long-term fiscal responsibility, while also exploring new partnerships amid changing global lending landscapes.
Kenya is strategically delaying the utilization of a $1.5 billion UAE loan to ensure it fits within its budgetary constraints. With rising debt levels and ongoing negotiations for further funding with the IMF, the government is focused on solidifying its financial footing. Recent borrowing actions, including a new dollar bond, indicate proactive measures to manage debt maturity effectively while considering new funding avenues.
Original Source: www.marketscreener.com
