Kenya has entered into discussions with the International Monetary Fund (IMF) and other development financial institutions to secure funding for the impending $2.0 billion (Sh297.6 billion) Eurobond repayment, due in June 2024.
Facing challenges in global markets, the Kenyan government is exploring the option of obtaining a loan from these multilateral institutions to manage the maturing debt.
Catherine Pattillo, IMF’s Deputy Director for Africa, revealed that the request for additional financing will be a key point during an upcoming review mission in December. Kenya has already accessed $2.1 billion (Sh312.5 billion) from the existing IMF program. The extension of this program will run until April 2025.
Pattillo mentioned that Kenyan authorities are working closely with the IMF, World Bank, and other donors to strengthen their economic program and secure additional funding while implementing fiscal measures.
Simultaneously, Citigroup and Standard Bank have been chosen as lead arrangers for Kenya’s new Eurobond issuance, reflecting the government’s strategy to diversify its financial sources.
The Central Bank of Kenya (CBK) prefers seeking concessional financing to fulfill the Eurobond obligation, given the current challenges in the credit market. Negotiations with multilateral institutions, the World Bank, and the IMF are ongoing to explore additional financial resources.
The IMF’s latest economic forecast has revised Kenya’s growth projection for 2023 to 5.0 percent, reflecting the challenges faced by the country. Investors have shown concerns, demanding over 18 percent returns to invest in Kenya’s Eurobond. Yields on the 10-year Eurobond maturing in June 2024 are fluctuating between 18.4 and 18.7 percent.
Kenyan leaders are determined to reassure investors of their commitment to refinance the Eurobond, dismissing any possibility of a sovereign default. However, President William Ruto’s recent call for debt restructuring for developing countries at the United Nations General Assembly has brought increased attention to Kenya’s financial stability and obligations.
These ongoing negotiations with the IMF and the World Bank highlight Kenya’s proactive approach to managing its financial responsibilities and ensuring economic stability.
Photo by FRED TANNEAU / AFP
By: Montel Kamau
Serrari Financial Analyst
11th October, 2023
