Kenya will delay drawing from a $1.5 billion UAE loan to align with its budget plans for the current fiscal year. With rising debt costs, the country has raised $1.5 billion through a new bond issuance while engaging in discussions with the IMF. The strategy includes assessing budget gaps before utilizing UAE funds, amidst efforts to strengthen financial ties with the Emirates.
Kenya has decided to postpone the withdrawal of funds from a $1.5 billion bond issued in the United Arab Emirates, as confirmed by Finance Minister John Mbadi. The decision aims to align with the country’s fiscal framework and ensure proper integration into their budgetary plans for the current financial year. After experiencing difficulties related to increased debt service costs following extensive borrowing, Kenya is keen to stabilize its financing.
As discussions with the International Monetary Fund (IMF) regarding a new lending program are ongoing, the Kenyan government raised $1.5 billion through a ten-year dollar bond this week to address imminent debt maturities. By the end of June, the government anticipates receiving over $950 million from various external sources like the World Bank and the African Development Bank.
Mbadi noted, “The reason we haven’t done it is because we have to do it within our fiscal framework,” highlighting the need for a thoughtful approach to managing the UAE loan. The government aims to determine the exact budgetary gap from external financing before drawing from the UAE funds.
Notably, since taking office in October 2022, President William Ruto has been working to enhance trade relations with the UAE, marking an important financial partnership as China reduces its lending to Africa and Eurobond yields increase. The UAE loan, negotiated last year, carries an interest rate of 8.25% and is to be repaid in installments of $500 million due in 2032, 2034, and 2036.
The funds from the recent bond issuance will be utilized partly for liability management and budget support, with $900 million allocated to repurchase a Eurobond maturing in 2027 and the remainder for settling due syndicated loans.
In summary, Kenya is strategically delaying the withdrawal of $1.5 billion from the UAE to ensure it fits within its fiscal plans while seeking to stabilize its financial position amid rising debt burdens. The country’s proactive measures involve new bond issuances and anticipated external funding, alongside ongoing negotiations with the IMF for future financial support. The strengthening of ties with the UAE presents additional opportunities for financial stability.
Original Source: eastleighvoice.co.ke
