Kenya is delaying the withdrawal of a $1.5 billion loan from the UAE, aiming to align it with its budgetary needs. Finance Minister John Mbadi mentioned ongoing discussions with the IMF for a new lending program and highlighted the need for careful fiscal management. The UAE loan is scheduled for repayment from 2032, with the current bond issuance being used to manage existing debts.
Kenya will postpone the disbursement of a $1.5 billion loan from the United Arab Emirates. Finance Minister John Mbadi emphasized the importance of aligning this action with the country’s fiscal framework for the current financial year. After a significant increase in debt servicing, the government is taking cautious steps to stabilize its finances and is in discussions with the International Monetary Fund regarding a potential new lending program before April.
The East African nation has faced financial pressure due to escalating debt service costs, prompting a prudent approach to borrowing. Mbadi indicated that the government is closely monitoring external funding sources, which are anticipated to exceed $950 million from various institutions, including the World Bank and the African Development Bank, by the end of June.
As Kenya prepares to draw funds in a manner that complements its budget, the UAE loan represents a strategic financial avenue, especially as traditional lenders like China have reduced their support. The UAE funding arrangement, established last year, carries an interest rate of 8.25% and is scheduled for repayment in three installments from 2032 to 2036.
Part of the funds raised through a recent $1.5 billion bond will be allocated to repurchase an upcoming Eurobond maturing in 2027, with the remainder aimed at repaying existing syndicated loans due later in the year. President William Ruto has actively sought to bolster trade relations with the UAE since his inauguration in October 2022.
In summary, Kenya is strategically deferring access to the $1.5 billion UAE loan to ensure it fits within its fiscal planning amidst rising debt pressures. The government is assessing its external funding status and utilizing a recent bond issuance to manage existing debts effectively. Enhancing relations with the UAE indicates a new chapter in Kenya’s financing strategy.
Original Source: eastleighvoice.co.ke
