Kenya will delay the drawdown of a $1.5 billion loan from the UAE to align with its fiscal budget. The decision comes as the country faces increased debt service costs. Ongoing discussions with the IMF for a new loan are also taking place. The government has raised an additional $1.5 billion through a bond for debt management and plans to allocate funds accordingly.
Kenya has decided to defer the drawdown of a $1.5 billion loan from the United Arab Emirates to align with its budgetary needs for the fiscal year. Finance Minister John Mbadi stated that the delay is strategically aimed at fitting the funding within Kenya’s fiscal framework. The nation is currently grappling with rising debt service costs amid substantial borrowing in recent years, hence seeking to stabilize its financial situation.
In the meantime, Kenya is engaged in negotiations with the International Monetary Fund (IMF) regarding a new lending program as the existing agreement is set to expire in April. Mbadi highlighted that the government hopes to secure over $950 million from various external sources before deciding on utilizing the UAE loan. These sources include the World Bank and the African Development Bank.
Kenya recently issued another $1.5 billion dollar bond with a duration of 10 years to manage its upcoming debt maturities. President William Ruto’s administration has also prioritized strengthening trade relations with the UAE following the agreement for this loan last year. The loan from the UAE carries an interest rate of 8.25%, repayable in three installments.
Of the $1.5 billion raised from the bond, the government plans to allocate $900 million for the buyback of a 2027-maturing Eurobond and the remainder to settle syndicated loans due later this year. This strategy reflects Kenya’s intent to manage its liabilities effectively while ensuring fiscal stability during the ongoing international borrowing climate, which has been impacted by rising Eurobond yields.
In conclusion, Kenya’s decision to postpone accessing the $1.5 billion UAE loan reflects a cautious approach to align it with the national budget requirements. The nation aims to stabilize its financial situation while seeking additional funding from international sources to cover potential budget gaps. The government’s strategic management of existing and new debts highlights its commitment to fiscal responsibility amid challenging borrowing conditions.
Original Source: eastleighvoice.co.ke
