Kenya to Use Part of World Bank $1.2Bn Loan to Offset Eurobond

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kenya-to-use-part-of-world-bank-$1.2bn-loan-to-offset-eurobond — Kenya to Use Part of World Bank $1.2Bn Loan to Offset Eurobond

The government will use part of US$ 1.2 billion Development Policy Operations (DPO) loan approved by the World Bank Board last week to settle the remaining part of the Eurobond falling due on 24th June 2024.

In February, the government said it would buy back more than US$ 1.4 billion of its US$ 2 billion Eurobond maturing in June via a tender offer launched that month for a new bond.It means that, by the end of this month, the government will have to pay about US$ 500 million to clear the Eurobond.Last week, Word Bank said it expected the Kenyan government to use part of the new US$ 1.2 billion DPO to foster more competitive and inclusive product and labor markets, and strengthen climate action, among other long-term measures.The Central Bank of Kenya (CBK) Governor Kamau Thugge said using part of the money to settle remaining part of the Eurobond will not have effect on the Kenya Shilling, which has recently displayed strong performance against major world currencies.

“Our exchange rate is determined by the market forces, recently inflows from foreign exchange has been higher than the demand, so we expect going forward a fairly stable exchange rate. We don’t see significant weakening or strengthening, there should be stability in the exchange rate,” he said.

“We will continue to be market determined and we will intervene if there is excessive volatility on either side, we will see how the current accounts, capital accounts perform.”

The Kenya shilling has strengthened in 2024 due to increase of foreign exchange inflows, the impact of monetary policy measures, reforms in the foreign exchange market and the buyback of the June 2024 Eurobond which was done in February this year.

The Kenya shilling has appreciated against the United States Dollar by 17 per cent. Within Africa, the Kenya Shilling has a strong performance followed closely by the Botswana Pula.

The CBK foreign exchange reserves, which currently stand at US$ 6,979 million (3.63 months of import cover), continue to provide adequate cover and a buffer against any short-term shocks in the foreign exchange market.