David Ndii, the chair of the Presidential Council of Economic Advisors, has reassured the nation that everything is in order for the 2024 Eurobond redemption. He claimed that the International Monetary Fund’s (IMF) help was responsible for the funding.
Kenya’s first Eurobond loan is anticipated to cost $2 billion by June 2024. The Central Bank Governor’s announcement that the nation will use its foreign exchange reserves to repay the loan had sparked market turbulence.
With over Sh10 trillion in public debt, Kenya has avoided the Eurobond market due to high global interest rates, which has created economic trepidation throughout the country.
“Without the IMF programme, we would probably default. Let’s be honest. As of now, the 2024 Eurobond is fully funded…we have access to the entire IMF balance sheet… I hope that settles the matter once and for all,”
Kenya had suggested repurchasing a portion of the bond and funding the remaining amount with reserves held by the Central Bank of Kenya (CBK). Moodys Investor Service analysts, however, stated that such action would be equivalent to a default.
While countries have constraints on where their foreign exchange should be spent, Kenya is experiencing a severe lack of currency to pay off its foreign debt at a time when its agricultural exports, like tea, are struggling because they are secondary or luxury goods.
Nonetheless, given a solid working relationship with the IMF, Goldman Sachs analysts are still confident that the nation would manage its way through the issues and avoid default.
President William Ruto has been eager to implement the IMF’s recommendations, which include selling off non-performing state firms, removing the gasoline excise tax of sixteen percent, and weaning faltering state enterprises off of the exchequer.
In order to obtain funds under difficult market conditions, Kenya has been conducting tap sales or extending its current bonds. Lenders tend to lend short term due to concerns about potential government default.
Since then, Kenyan banks’ reputation on the Nairobi Securities Exchange (NSE) has suffered as a result of their significant exposure to government bonds.