Kenya will wait to draw down $1.5 bln UAE loan, finance minister says
Business
The East African nation has struggled with a surge in debt service costs
CAPE TOWN (Reuters) - Kenya will wait to draw cash from a $1.5 billion privately placed bond in the United Arab Emirates so that it can fit into its budget plans for this financial year, Finance Minister John Mbadi said on Friday.
The East African nation has struggled with a surge in debt service costs in recent years following a borrowing spree and is seeking to put its financing on a more solid footing while talks are already underway with the International Monetary Fund over a new lending programme once the current one expires in April.
"The reason why we have not done it is that we have to do it within our fiscal framework," Mbadi told Reuters, in reference to tapping cash from the UAE loan.
Kenya has also raised $1.5 billion in a new 10-year dollar bond this week to manage upcoming maturities.
By the end of June, Mbadi added, the government is expecting more than $950 million in funding from other external sources, including the World Bank, the African Development Bank, Italy and Germany.
"We are still holding out to see exactly how much budget gap we will still have from the external finances before we draw the (UAE) money," said Mbadi, speaking by phone from Nairobi.
The country's fiscal year runs from July 1 till June 30.
Kenya's move to borrow from the UAE marks a new source of funding, after China scaled back its lending to Africa and a surge in Eurobond yields hindered frontier issuers.
Kenyan President William Ruto has also moved to strengthen trade ties with the UAE since taking office in October 2022.
The UAE lending, agreed last year, has an 8.25% interest rate and will be repaid in $500 million instalments in 2032, 2034 and 2036, Mbadi said.
"We can use it partly for liability management, partly for budgetary support, or exclusively for budgetary support," he said.
The government will use $900 million of the $1.5 billion bond issued this week to buy back a 2027-maturing Eurobond, Mbadi said, and will use the balance to retire syndicated loans that are falling due later this year.
