Kenya Prioritises Concessional Financing for Maturing 2024 Eurobond

Francis Kyei, Senior Market Analyst, GFX Prime

• Kenya is taking steps to reassure investors regarding its maturing 2024 Eurobond. The government is emphasising concessional financing and considering an augmentation of its IMF loan programme to potentially secure more financial resources.

• Kenya is actively engaging with the IMF and the World Bank, expecting around $400 million from its existing IMF programme and planning to secure a $750 million loan. This is part of a strategy to manage debt and meet its financial obligations.

• With Kenya’s foreign currency reserves totaling around $6.8 billion, the country is well-prepared for the maturing Eurobond and also intends to repurchase 25% of the maturing Eurobond.

Amid concerns related to mounting debt repayments, currency fluctuations, and increasing bond yields, Kenya is making strategic moves to reassure investors and stabilise its financial outlook. Wallace Kantai, the Director of Communications at the Central Bank of Kenya, confirmed that the country is prioritising concessional financing and concurrently developing a contingency plan involving a potential buyback.

During a phone interview, Mr. Kantai mentioned that Kenya is engaged in discussions with the International Monetary Fund (IMF) to explore the possibility of augmenting its existing loan program. If approved by December 2023, this augmentation would provide Kenya with additional financial resources from the IMF, but it also comes with conditions and requirements.

Following the ongoing IMF review, Kenya expects approximately $400 million from its existing program, with an additional $530 million anticipated next year. This augmentation would further bolster the country’s financial support. Kenya is also in active dialogue with the World Bank to secure a planned $750 million loan set for March.

The prospect of requesting exceptional access from the IMF, which would allow Kenya to exceed its typical limit for IMF funding, is being considered. If approved, this would mark the third increase in the loan program, initially set at $2.3 billion in 2021.

Additionally, Kenya’s foreign currency reserves, currently estimated at approximately $6.8 billion as of November 2, play a crucial role in the country’s debt management strategy. If Kenya is unable to issue new international bonds, the country will rely on its reserves.

The buyback initiative is contingent on Kenya securing new loans, which the country intends to raise through negotiations with regional policy banks, including the Trade & Development Bank and the African Export-Import Bank. This move is designed not only to alleviate the burden of impending debt but also to signal Kenya’s commitment to meeting its financial obligations.

While Kenya will have no Eurobond maturing until 2027, after the maturing bond in June 2024, Kenya is anticipating KES 60.2 billion (US$400.0 million) from the IMF by December 2023 under the existing program, US$750.0 million by March 2024, and an additional US$530.0 million from its IMF program next year.