Kenya has written to the International Monetary Fund(IMF) indicating its intention to float a new Eurobond before the end of this year.
In a Memorandum of Economic and Financial Policies (MEFP) to the IMF, signed by Kenya’s Treasury CS Ukur Yatani and CBK Governor Dr Patrick Njoroge, Kenya said it plans to issue a Eurobond by the end of December 2021 to provide financing of the 2021/22 budget.
This financing was previously programmed for early 2022 but appears to have hastened the process to avoid the risks associated with the upcoming general elections in August 2022.
Kenya also told the IMF that it will issue another Eurobond by end of June 2022, subject to favourable market conditions, to repay in full or part the bond maturing in 2024 as part of a debt management operation.
Kenya to borrow KSh 247 Billion in the two tranches
The IMF indicates that Kenya will borrow US$2.19 billion (KSh247 billion) through these two commercial loans.
In 2021, 64% of external public financing is expected to come in the form of concessional and semi-concessional borrowing, including from the IMF and the World Bank.
Financing from commercial lenders is estimated at US$2.2 billion, reflecting the successful placement of US$1 billion Eurobond in June 2021—amid strong demand that saw the yield fall below the initial guidance to 6.3%—and the likely shift of the previously-planned Eurobond for 2021/22 to this calendar year.
Available figures indicate that foreign exchange reserves were bolstered by significant inflows in the second quarter of 2021, including Eurobond issuance of US$1 billion, US$750 million in budget support from the World Bank, and two disbursements totalling US$715 million from the Fund under the present program.
At US$9.6 billion at the end of September 2021, CBK reserves continue to provide adequate cover against short-term external shocks.
As part of a continuing commitment to reduce debt-related vulnerabilities, Kenya is expected to continue to rely on concessional development financing, while tapping international financial markets to roll over maturing Eurobonds and optimize the debt service profile.
Looking ahead, Kenya is expected to continue to tap global capital markets to roll over maturing Eurobonds, with the next Eurobond repayment falling due in June 2024.