To accommodate it in its budget plans for this fiscal year, Kenya will postpone withdrawing money from a USD 1.05 billion privately placed bond in the United Arab Emirates, Finance Minister John Mbadi announced.
After going on a borrowing binge in recent years, the East African country is attempting to stabilise its financing. At the same time, negotiations are already underway with the International Monetary Fund regarding a new lending programme, which is set to expire in April.
“The reason why we have not done it is that we have to do it within our fiscal framework,” John Mbadi told Reuters, referring to tapping cash from the UAE loan.
To handle impending maturities, Kenya has also raised USD 1.05 billion this week through a new 10-year bond.
The government anticipates receiving over $950 million in funding by the end of June 2025 from additional outside sources, such as the World Bank, the African Development Bank, Italy, and Germany, John Mbadi continued.
“We are still holding out to see exactly how much budget gap we will still have from the external finances before we draw the (UAE) money,” John Mbadi said.
The nation’s fiscal year lasts from July 1 to June 30. After China reduced its lending to Africa and a spike in Eurobond yields hampered frontier issuers, Kenya chose to borrow from the UAE, opening a new source of funding.
Additionally, since assuming office in October 2022, Kenya President William Ruto has taken steps to improve trade relations with the United Arab Emirates.
John Mbadi stated that the loan from the UAE, agreed upon last year, will be repaid in instalments of USD 500 million in 2032, 2034, and 2036.
It carries an interest rate of 8.25%.
“We can utilise it for budgetary support, liability management, or budgetary support alone,” he stated.
In addition to using the remaining funds to retire syndicated loans that are due later this year, John Mbadi stated that the government will use USD 900 million of the USD 1.05 billion bond issued this week to buy back a 2027-maturing Eurobond.