KENYA intends to go to international bond markets as soon as the market situation allows, its finance minister and central bank governor said in a letter to the International Monetary Fund published.
The East African nation has been on the radar of foreign investors in recent months due to a $2 billion Eurobond that is maturing this June amid a drop in hard currency reserves, a steep weakening of the currency, and revenue challenges.
Separately, the head of an IMF mission to Kenya said the fund does not think Kenya will default on its Eurobond payment.
The rolling over of the bond poses a major challenge, the government said in the letter, but the processes for meeting its obligations were underway.
“The National Treasury procured international lead managers and counsels in September 2023 to pave the way to tap the international bond market at an opportune time,” it said.
Haimanot Teferra, IMF mission chief for Kenya, said the fund did not think the country would default on the repayment and would navigate through the liquidity pressure involved.
“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 told a virtual news conference.
Kenya secured the IMF board’s approval for $941 million in lending on Wednesday, but the fund’s assessment of the country’s prospects of accessing reasonably priced commercial debt was downbeat.
“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,” the fund said in its report.
“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.
Rising social discontent, mainly driven by the high cost of living, was further compounding the challenges, which also include underperforming revenue collection, the IMF said.
To address the liquidity challenges, the government is in talks with the World Bank to boost the amount of cash it will get from the institution for budget support, it said in the letter to the IMF.
“We are pursuing alternative sources of financing from multilateral and bilateral lenders and the syndicated loans market,” the finance minister and central bank chief said in the letter.
They cited a syndicated loan led by the Regional Trade Development Bank, whose negotiations are close to conclusion.
