Kenya Delays Access to $1.5 Billion UAE Loan for Budgetary Alignment

Kenya is postponing the drawdown of a $1.5 billion UAE loan to properly fit it into its budget plans. Finance Minister John Mbadi indicated that this decision aligns with ongoing dialogues with the IMF for future lending. The country has also raised $1.5 billion through a new bond to manage debt maturities while seeking further funding from international sources.

Kenya has decided to defer the withdrawal of $1.5 billion from a privately placed bond in the United Arab Emirates (UAE) to align with its financial planning for the current fiscal year. Finance Minister John Mbadi stated that the country is currently in discussions with the International Monetary Fund (IMF) regarding a new lending program set to commence after the expiration of the existing one in April.

The East African nation is grappling with increasing debt servicing costs, which have surged due to extensive borrowing in recent years, prompting the government to seek more stable financing solutions. Minister Mbadi highlighted that the decision to delay accessing the UAE loan is to ensure coherence within the fiscal framework, emphasizing the need to evaluate the anticipated budget gap from external finances.

Kenya recently obtained $1.5 billion from a new 10-year dollar bond intended to manage upcoming debt maturities. Mbadi announced an expectation of over $950 million in funding from various international partners, including the World Bank and the African Development Bank, by the end of June, indicating a cautious financial approach going forward.

The country’s fiscal year extends from July 1 to June 30. Kenya’s plans to borrow from the UAE signify a diversification of funding sources, particularly following a reduction in lending from China and rising yields on Eurobonds. President William Ruto has also initiated efforts to strengthen trade relations with the UAE since taking office in October 2022.

The agreement with the UAE entails an interest rate of 8.25%, with repayments scheduled in $500 million installments in the years 2032, 2034, and 2036. Minister Mbadi clarified that the funds can be utilized for various purposes, including liability management and budgetary support.

Of the newly issued bond, $900 million will be earmarked for buying back a Eurobond maturing in 2027, while the remainder will be allocated for retiring other loans due later this year.

In conclusion, Kenya intends to strategically manage its external debt by delaying access to the $1.5 billion UAE loan, ensuring alignment with its fiscal framework. The government is actively pursuing additional funding and engaging with the IMF for sustainable financial solutions amidst ongoing discussions to enhance its budgetary support and liability management.

Original Source: eastleighvoice.co.ke