Kenya Delays $1.5 Billion UAE Loan to Align with Fiscal Strategy

Kenya is delaying the drawdown of a $1.5 billion UAE loan to align with its fiscal plans amidst rising debt service costs. Minister John Mbadi noted the government is assessing its budget gap before utilizing the loan. Alongside this, Kenya raised $1.5 billion through a new bond and expects additional external financing soon.

Kenya is postponing its utilization of a $1.5 billion loan from the United Arab Emirates to ensure alignment with its fiscal strategies for the current financial year, as stated by Finance Minister John Mbadi. The nation has faced escalating debt service costs amid a recent borrowing surge, prompting a need for increased financial stability. Ongoing discussions with the International Monetary Fund aim to secure a new lending program prior to the expiration of the current one in April.

Mbadi explained, “The reason why we have not done it is that we have to do it within our fiscal framework,” referring to the delay in accessing funds from the UAE loan. Recently, Kenya successfully raised $1.5 billion through a new 10-year dollar bond to manage upcoming debt maturities. By the conclusion of June, the government anticipates over $950 million from external funding sources, including the World Bank and regional partners.

The intention to borrow from the UAE represents a new funding avenue as traditional sources, such as China, have diminished their lending to Africa. Since his inauguration in October 2022, President William Ruto has sought to enhance trade relationships with the UAE. The previously agreed UAE loan, which incurs an 8.25% interest rate, will be repaid in three $500 million installments in 2032, 2034, and 2036.

Minister Mbadi further detailed that the funds could serve dual purposes, stating, “We can use it partly for liability management, partly for budgetary support, or exclusively for budgetary support.” Notably, the government intends to allocate $900 million from the recent bond issuance to repurchase a Eurobond maturing in 2027 and to settle other loans due later this year.

In summary, Kenya is strategically delaying the drawdown of a $1.5 billion loan from the UAE to ensure coherence with its fiscal plans. This decision comes amid rising debt obligations and active negotiations for a new IMF program. By leveraging multiple funding sources, including a recent bond issuance, the government aims to achieve financial stability while managing debt liabilities effectively.

Original Source: www.tradingview.com

About Marcus Chen

Marcus Chen has a rich background in multimedia journalism, having worked for several prominent news organizations across Asia and North America. His unique ability to bridge cultural gaps enables him to report on global issues with sensitivity and insight. He holds a Bachelor of Arts in Journalism from the University of California, Berkeley, and has reported from conflict zones, bringing forth stories that resonate with readers worldwide.

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