The uncertainty surrounding the redemption of Kenya’s $2 billion (Sh294 billion) Eurobond, set to mature in June 2024, has cast a shadow over the country’s ability to service its debt.

This unease has been further exacerbated by conflicting statements from key government officials, including President William Ruto, National Treasury Cabinet Secretary Ndung’u, and the Central Bank Governor Kamau Thugge.

In June of this year Ruto made a surprising announcement, stating that Kenya would repurchase half of the Eurobond before the end of the current year.

His statement was met with a mix of optimism and skepticism, as investors awaited further details on the government’s plan to address the impending debt obligation.

However, in July, Ndung’u took a different stance, revealing his uncertainty about the timing of the Eurobond repurchase. He went on to disclose that a list of banks had been shortlisted as potential arrangers to refinance the Eurobond, indicating a shift away from the earlier commitment made by President Ruto.

Ndung’u also stated that he would provide updates on the progress of the refinancing efforts. Thugge has added to the confusion by telling Bloomberg that the government intended to build reserves and ultimately pay back the bondholders.

“Our strategy is to build enough national reserves within the central bank so that by the time the bond matures, we can pay it back without going to the capital markets,” he told Bloomberg TV.

President Willima Ruto’s commnent that the government will buy back the Eurobond was met with a strong rejoinder from Moody’s rating agency which said it will treat the move as an act of default.
These conflicting statements from high-ranking government officials have sent mixed signals to the financial market, leaving investors and analysts in a state of uncertainty. The lack of clarity regarding Kenya’s approach to addressing the impending Eurobond maturity has raised concerns about the country’s creditworthiness and its ability to meet its financial obligations.

One of the potential consequences of this uncertainty is the risk of Eurobond yields rising. As investors grapple with the conflicting messages from the government, they may demand higher yields to compensate for the increased risk associated with Kenyan debt. This, in turn, could lead to higher borrowing costs for Kenya in the future, making it more challenging for the country to access international capital markets on favorable terms.

To mitigate this risk and restore confidence among investors, it is imperative that the Kenyan government provides a clear and consistent plan for addressing the upcoming Eurobond maturity.

Clarity on the government’s strategy, whether it involves repurchasing the Eurobond, refinancing it, or pursuing alternative solutions, will be crucial in stabilising the financial markets and safeguarding Kenya’s reputation as a reliable borrower on the global stage.

As the June 2024 deadline approaches, all eyes will remain on Kenya, with the hope that a unified and transparent approach will ultimately prevail, providing much-needed reassurance to investors and averting a potential financial crisis.

Earlyb this year, the World Bank expressed worry about the ability of Kenya and other sub-Saharan to refinance their multi-billion Eurobonds in the coming months following the difficulties facing the global debt markets that have triggered a new wave of expensive loans.