Kenya has chosen to delay tapping into a $1.5 billion bond from the UAE to ensure budget alignment, as stated by Finance Minister John Mbadi. Amid rising debt service costs, the country seeks to negotiate a new IMF program and has issued a new $1.5 billion dollar bond to manage upcoming maturities, while also exploring additional external funding sources.
Kenya has decided to postpone the withdrawal of $1.5 billion from a bond placed privately in the United Arab Emirates, as announced by Finance Minister John Mbadi. The postponement aims to align with the country’s fiscal framework for the current financial year. As Kenya grapples with escalating debt service costs due to previous borrowing, it strives for a more stable financial footing while negotiating a new program with the International Monetary Fund (IMF) before the current agreement concludes in April.
Minister Mbadi explained that the rationale behind delaying the cash drawdown is to ensure that it fits into the country’s established fiscal framework. Additionally, Kenya recently issued a new 10-year dollar bond worth $1.5 billion to facilitate the management of impending debt maturities. The government anticipates obtaining over $950 million from various international sources, including the World Bank and the African Development Bank, by June.
Kenya’s consideration to borrow from the UAE is significant, particularly as Chinese funding to Africa has diminished and rising Eurobond yields have obstructed additional borrowing avenues. Since taking office in October 2022, President William Ruto has actively sought to enhance trade relations with the UAE. The loan from the UAE, secured last year, carries an interest rate of 8.25% and is scheduled for repayment in three installments of $500 million each, due in 2032, 2034, and 2036.
The finance minister emphasized various uses for the funds, stating that they could support liability management or be strictly allocated for budgetary purposes. Furthermore, Kenya will allocate $900 million from the recent bond issuance to repurchase a Eurobond maturing in 2027, with the remaining funds directed towards settling other loans due this year.
In conclusion, Kenya’s prudent decision to delay accessing the $1.5 billion bond from the UAE reflects a strategic move to ensure financial stability and effective resource management within its fiscal framework. The ongoing negotiations with the IMF and the recent issuance of a dollar bond indicate a focused approach towards addressing debt obligations while fostering stronger international financial partnerships.
Original Source: www.marketscreener.com
