Kenya to scout international bond market over ailing economy: summary
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What we know
- Kenya has expressed its intention to tap into the international bond markets when conditions permit in a letter to the International Monetary Fund published on January 18.
- This move comes against a backdrop of declining hard currency reserves, a significant weakening of the national currency, and challenges in generating revenue, contributing to the heightened focus on Kenya's economic situation. The East African nation has garnered increased attention from foreign investors in light of a $2 billion Eurobond set to mature this June.
- However, the IMF mission chief is confident that the country will not default on repayment obligations.
- Meanwhile, the International Monetary Fund (IMF) approved the immediate disbursement of $684.7 million to Kenya to bolster the country's foreign exchange reserves and provide essential financial support ahead of a crucial euro bond repayment scheduled for June. The injection of funds from the IMF is intended to assist Kenya in meeting its financial obligations and managing economic challenges effectively.
- The disbursement of $684.7 million to Kenya by the International Monetary Fund includes $624.5 million from an expanded program established with the Washington-based lender last year. Additionally, $60.2 million is part of the funds provided through the IMF's Resilience and Sustainability Facility.
What they said
The IMF mission chief for Kenya, Haimanot Teferra, said that the International Monetary Fund does not anticipate Kenya defaulting on the repayment of its Eurobond. Teferra expressed confidence that Kenya would successfully navigate through the liquidity pressure associated with the maturing Eurobond. "We don't think Kenya will default on the Eurobond. The discussion yesterday and the board's approval of the review and the additional funding is in recognition of that," she is quoted by Reuters. The IMF has further indicated in its report that "Kenya's re-access to the Eurobond market in 2024 at a reasonable cost for a full rollover of its US$2 billion Eurobond maturing in June 2024 is unlikely. Kenya is at a high risk of debt distress, and public debt is estimated to have reached 73 percent of GDP by end-2023, with debt service consuming about 55 percent of revenues," the IMF said. Meanwhile, the finance minister and central bank chief has said that "we are pursuing alternative sources of financing from multilateral and bilateral lenders and the syndicated loans market.”