In a strategic move to address concerns regarding its $2 billion 2024 international bond, Kenya is set to repurchase a substantial portion before year-end. Central Bank Governor Kamau Thugge unveiled this initiative during an exclusive interview with Reuters, emphasizing Kenya’s proactive approach to managing its fiscal responsibilities.
Kenya is actively negotiating with the Trade & Development Bank and the African Export-Import Bank, two respected regional policy banks, to secure funds. These funds will serve a dual purpose: to manage the Eurobond liability and provide budgetary support. Thugge had previously expressed the country’s commitment to gradually reduce its Eurobond liability, and this move aligns with that goal.
The urgency of the situation is acknowledged, and international observers are keenly watching how Kenya intends to navigate the repayment of the $2 billion 2024 bond. Kenya’s rising debt obligations, currency depreciation, and escalating bond yields are challenges that resonate with many developing nations facing difficulties in international capital markets.
Alongside negotiations with regional banks, Kenya is in discussions with the International Monetary Fund (IMF) regarding the potential augmentation of its loan program. The outcome of the sixth review in November will determine the terms of this augmentation. Additionally, discussions with the World Bank are ongoing to enhance a $750 million loan already scheduled for March.
Governor Thugge emphasized Kenya’s openness to exploring “exceptional access,” which would enable the nation to request funding beyond its established IMF limit. If approved, this would mark the third expansion of the loan program, originally set at $2.3 billion in 2021.
In the event that Kenya cannot issue new international bonds and needs to tap into foreign currency reserves to meet financial obligations, the central bank forecasts that reserves will amount to approximately $7 billion by the end of June 2024. As of October 5, the central bank reported $6.9 billion in usable foreign exchange reserves, sufficient to cover around 3.7 months’ worth of imports.
Maintaining financial stability, the central bank opted to keep its main interest rate at 10.5% on October 3. September’s inflation rate rose modestly to 6.8% from 6.7% the prior month, having previously fallen below the 7.5% target in June, marking the first time in a year. While Thugge refrained from specifying a timeframe, he emphasized that they would maintain current interest rates for the foreseeable future due to exchange rate pressures. However, they would take necessary measures if inflation exceeds 7.5%, and they would consider rate reductions if inflation dropped to 5% and exchange rate pressures eased.
Despite Kenya’s fiscal challenges, the nation’s economic growth prospects remain promising. Governor Thugge indicated that the economy is on track to expand by 5.5% this year and is projected to continue growing at a rate of around 6% in 2024. These growth forecasts surpass the IMF’s projections for Sub-Saharan Africa, offering a glimmer of hope amid Kenya’s financial complexities.
Photo Source: Boniface Okendo, Standard
By: Montel Kamau
Serrari Financial Analyst
12th October, 2023
Article and News Disclaimer
The information provided on www.serrarigroup.com is for general informational purposes only. While we strive to keep the information up to date and accurate, we make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability, or availability with respect to the website or the information, products, services, or related graphics contained on the website for any purpose. Any reliance you place on such information is therefore strictly at your own risk.
www.serrarigroup.com is not responsible for any errors or omissions, or for the results obtained from the use of this information. All information on the website is provided on an "as-is" basis, with no guarantee of completeness, accuracy, timeliness, or of the results obtained from the use of this information, and without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability, and fitness for a particular purpose.
In no event will www.serrarigroup.com be liable to you or anyone else for any decision made or action taken in reliance on the information provided on the website or for any consequential, special, or similar damages, even if advised of the possibility of such damages.
The articles, news, and information presented on www.serrarigroup.com reflect the opinions of the respective authors and contributors and do not necessarily represent the views of the website or its management. Any views or opinions expressed are solely those of the individual authors and do not represent the website's views or opinions as a whole.
The content on www.serrarigroup.com may include links to external websites, which are provided for convenience and informational purposes only. We have no control over the nature, content, and availability of those sites. The inclusion of any links does not necessarily imply a recommendation or endorsement of the views expressed within them.
Every effort is made to keep the website up and running smoothly. However, www.serrarigroup.com takes no responsibility for, and will not be liable for, the website being temporarily unavailable due to technical issues beyond our control.
Please note that laws, regulations, and information can change rapidly, and we advise you to conduct further research and seek professional advice when necessary.
By using www.serrarigroup.com, you agree to this disclaimer and its terms. If you do not agree with this disclaimer, please do not use the website.
www.serrarigroup.com, reserves the right to update, modify, or remove any part of this disclaimer without prior notice. It is your responsibility to review this disclaimer periodically for changes.
Serrari Group 2023
