Kenya Insights

Tag: International Monetary Fund (IMF)

  • Kenya Close To Agreeing Sh194 Billion Budget Support Loan From UAE, At 8.2pc Interest Rate

    Kenya Close To Agreeing Sh194 Billion Budget Support Loan From UAE, At 8.2pc Interest Rate

    (Reuters)-Kenya’s government is close to agreeing a $1.5 billion (Approx KES194 billion) loan from the United Arab Emirates with an interest rate of 8.2% which will help bridge the East African nation’s financing gap, a source familiar with the situation told Reuters.

    “Kenya is diversifying its sources of budget support,” said the source, adding the “deal is as good as done.”

    The UAE ministry of finance and the UAE central bank did not immediately respond to a request for comment.

    Kenya’s Finance Minister John Mbadi and other senior officials at the ministry were not immediately available for comment.

    The country’s dollar bonds rallied after the news, with the 2048 maturity rising by as much as 1.89 cents to trade at 84.3 cents on the dollar, Tradeweb data showed.

    The government has been struggling to find new sources of financing after deadly protests forced President William Ruto to discard planned tax hikes worth more than 346 billion shillings ($2.7 billion) in June.

    A delay in funding from the International Monetary Fund has aggravated the situation.
    Kenya is now expecting its overall budget deficit to widen to 4.3% of GDP this financial year, compared with 3.3% under the original, pre-protest budget.

    Nairobi has had to pay a high price for the financial support it has received. In February Kenya issued a $1.5 billion Eurobond to help it manage maturities, but it paid a steep 10.375% yield for the seven-year bond.

    Bloomberg reported earlier on Wednesday that Kenya was in talks on a loan deal with Abu Dhabi.

    Under President Ruto, who took over in September 2022, Kenya has forged closer ties with the UAE.

    The UAE’s Abu Dhabi National Oil Company (ADNOC) and Emirates National Oil Company were among three Gulf firms Ruto’s government picked last year to supply Kenya with oil on longer credit terms, in a shift from an open tender system.

    The UAE provided Ethiopia with $1 billion in 2018 to help with a severe hard currency cash crunch, and the central banks of both sides announced an $817 million swap line in July.

    The UAE also signed a deal with Egypt earlier this year to develop a prime stretch of its Mediterranean coast that was expected to bring $35 billion of investments into the Egyptian economy.

  • IMF Approves Sh150B Further Loan For Kenya

    IMF Approves Sh150B Further Loan For Kenya

    The International Monetary Fund (IMF) on Wednesday approved a $941 million (Ksh.150 billion) lending boost to Kenya, with an immediate disbursement of $624.5 million (Ksh.99.6 billion), offering some relief to the East African country as it battles financial pressures.

    The disbursement under the Extended Fund Facility (EFF) and Extended Credit Facility (ECF) programs will also be topped by a release of $60.2 million under the Resilience and Sustainability Facility (RSF) arrangement.

    The executive board sign-off brings the IMF’s total funding commitment to Kenya under all three facilities to more than $4.4 billion.

    “Kenya’s growth remained resilient in the face of increasing external and domestic challenges. The EFF/ECF and RSF arrangements continue to support the authorities’ efforts to sustain macroeconomic stability,” the IMF said in a statement on Wednesday.

    Kenya is grappling with acute liquidity challenges amid uncertainty over its ability to access funding from financial markets before a $2 billion Eurobond matures in June.

    The government has said that, together with expected funds from the World Bank and regional banks like the African Export-Import Bank and Trade & Development Bank, the IMF funds will help Kenya to pay the looming foreign debt maturity without running down its hard currency reserves.

    Kenya’s balance of payments and financial positions have also been strained by the legacy of the COVID-19 pandemic and frequent climate change-induced droughts, according to the IMF, while its shilling currency has weakened.

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    The approval of the new IMF money followed a staff-level agreement reached with Kenyan officials in November, with slight differences in dollar values due to currency fluctuations in the IMF Special Drawing Rights unit of account.- (Reuters).