Kenya plans to repurchase up to 25 per cent of its $2 billion (Sh298 billion) 2024 Eurobond before the end of the year.

The revelation from governor of the Central Bank of kenya (CBK) Kamau Thugge during an interview with Reuters, on the sidelines of the Marrakech meetings of the World Bank and IMF, also indicated that the funds will be used for budgetary support.

Kenya is currently negotiating commercial loans ranging between $500 million and $1 billion from two influential regional policy banks—the Trade & Development Bank and the African Export-Import Bank.
The injection of fresh funds is anticipated to provide Kenya with the liquidity required to navigate through its impending debt challenges.

“We would use part of that for the buyback, for the liability management, and the rest would be for the budget support,” said Thugge, who earlier this month said Kenya was expecting to “progressively reduce the liability of the Eurobond”.

“We would like to start as quickly as possible,” he said of the buyback.

This strategic move is seen as a proactive measure to address growing concerns about Kenya’s financial stability, especially in the face of a liquidity crisis.

Treasury Cabinet Secretary Njuguna Ndung’u openly admitted to the International Monetary Fund (IMF) that Kenya is grappling with liquidity issues. He emphasized that the challenges are not indicative of a solvency problem but rather a common struggle experienced by several African markets.

“I told the IMF we have a liquidity crisis, and every African market is behaving the same way; you cannot even raise debt. But, it is not a solvency problem. How we solve it must be congruent with where we want to go in terms of our solvency,” stated Treasury Secretary Njuguna Ndung’u during discussions with the IMF.

The decision to repurchase a substantial portion of the foreign bond is expected to serve multiple purposes. Firstly, to demonstrate Kenya’s commitment to proactively managing its debt and ensuring the stability of its financial system.

The buyback not only signals confidence to international investors but also aims to reduce the outstanding debt burden, potentially easing the strain on the nation’s financial resources.

The negotiations with the Trade & Development Bank and the African Export-Import Bank underscore Kenya’s efforts to diversify its sources of financing. By securing commercial loans from reputable regional institutions, the country aims to strengthen its financial position and establish partnerships that extend beyond the realm of traditional bond issuances.

Goldman Sachs opined that it is optimistic that Kenya will muddle through the 2024 challenges amidst liquidtiy concerns. The bank said that Kenya’s talks with IMF and taxation measures may help it in the medium term.

Kenya’s plan to buy back foreign bonds and secure new loans will be closely watched by international markets, shaping perceptions of the country’s financial resilience and influencing investor confidence in the region.