Kenya will delay accessing a $1.5 billion loan from the UAE to align with its budget. Finance Minister John Mbadi indicated that ongoing negotiations with the IMF are a priority as the country seeks stable financing methods amidst rising debt service costs. A recent $1.5 billion dollar bond issuance is also part of the government’s strategy to manage upcoming loan maturities and gaps in budget financing.
Kenya has decided to postpone drawing from a $1.5 billion bond issued in the United Arab Emirates, as announced by Finance Minister John Mbadi. The government is aligning this financial move with its budgetary goals for the current fiscal year, amid efforts to stabilize debt management after a recent surge in borrowing costs. As it stands, negotiations with the International Monetary Fund (IMF) are ongoing for a new lending program that will take effect following the expiration of the current one in April.
Mbadi clarified that the delay in accessing the UAE funds is due to the need to conform with the nation’s fiscal strategy. This cautious financial approach follows the issuance of a separate $1.5 billion dollar bond aimed at managing upcoming debt obligations. By the end of June, Kenya anticipates receiving over $950 million from various external partners, including the World Bank and the African Development Bank.
Additionally, Kenya’s decision to seek financing from the UAE introduces a new funding avenue, particularly as Chinese lending has decreased, and increased Eurobond yields present challenges for emerging market issuers. Since taking office in October 2022, President William Ruto has been working to enhance trade relations with the UAE. The UAE loan agreement, established last year, carries an interest rate of 8.25% and requires repayment in staggered installments of $500 million due in 2032, 2034, and 2036.
Part of the UAE-funded loan may serve either for budgetary support or for debt management, as asserted by Mbadi. At the same time, the government plans to use $900 million raised from the recent bond issuance for redeeming a Eurobond maturing in 2027 and to address other upcoming loan repayments.
In summary, Kenya is strategically postponing its drawdown from the UAE’s $1.5 billion loan to ensure alignment with its fiscal framework. This decision reflects ongoing efforts to manage debt responsibly while fostering stability, particularly as negotiations continue for new IMF financing. By diversifying funding sources and reinforcing international partnerships, Kenya aims to address its financial challenges effectively.
Original Source: www.marketscreener.com
