Kenya will postpone the drawdown of a $1.5 billion loan from the UAE to align it with its fiscal framework, as stated by Finance Minister John Mbadi. The country is also managing its debt through a new $1.5 billion dollar bond and is awaiting external funding from various sources. Discussions with the IMF are ongoing regarding a new lending program.
Kenya’s Finance Minister, John Mbadi, announced that the country will delay utilizing a $1.5 billion loan from the United Arab Emirates. This decision is made to ensure that the funds align with Kenya’s fiscal framework within its budget for the current financial year. The country is also engaged in discussions with the International Monetary Fund regarding a new lending program set to commence when the existing arrangement expires in April.
In light of rising debt service costs due to previous borrowing, Kenya is seeking better financing stability. Recently, Kenya raised an additional $1.5 billion through a new 10-year dollar bond to manage impending maturities. By the end of June, Mbadi indicated that Kenya anticipates receiving over $950 million from various external sources, including the World Bank and the African Development Bank.
Mbadi emphasized that Kenya is strategically assessing its external funding needs before tapping into the UAE loan. Markedly, this borrowing venture signifies a shift in funding sources, especially as China’s lending to Africa has diminished. Furthermore, since taking office in October 2022, President William Ruto has sought to enhance trade relations with the UAE.
The UAE loan, arranged last year, carries an interest rate of 8.25% and will be repaid in installments of $500 million in the years 2032, 2034, and 2036. Minister Mbadi clarified the potential uses for this funding: it could serve purposes for budgetary support or liability management. Moreover, Kenya plans to utilize $900 million from the recent bond issuance to repurchase a Eurobond due in 2027 and apply the remainder towards retiring future loans.
In summary, Kenya’s Finance Minister announced a strategic delay in drawing from a $1.5 billion UAE loan to align with the nation’s fiscal policies. As the country faces rising debt service challenges, it has also secured additional funding through a recently issued bond. This cautious approach underscores Kenya’s efforts to ensure financial stability and prepare for future commitments as it engages with international financial institutions.
Original Source: www.tradingview.com
