Kenya Delays Access to $1.5 Billion UAE Loan to Align with Fiscal Plans
Kenya’s Finance Minister John Mbadi confirmed that the government will delay accessing a $1.5 billion loan from the UAE to maintain fiscal appropriateness. The country faces increased debt service burdens while negotiating a new IMF program. Kenya has issued a $1.5 billion bond to address maturing debts and is anticipating further funding from various sources by June.
The Kenyan government will delay withdrawing funds from a $1.5 billion loan from the United Arab Emirates (UAE), as Finance Minister John Mbadi emphasizes the need to align with the country’s fiscal framework. Kenya has been grappling with increased debt service costs and aims to manage its financial resources prudently while exploring new budgetary strategies for the current fiscal year.
In light of tough economic conditions, the government is in discussions with the International Monetary Fund (IMF) regarding a new lending program set to follow the expiration of the current arrangement in April. This dialogue comes amid concerns for Kenya’s financial stability as the country navigates a rising debt burden and high borrowing costs due to recent fiscal decisions.
Mbadi highlighted that Kenya has secured $1.5 billion in a new 10-year dollar bond to facilitate the repayment of maturing debts, indicating a focused approach to debt management. Additionally, the government anticipates receiving over $950 million in funds from various external sources, including the World Bank and the African Development Bank, by June’s end.
The decision to borrow from the UAE emerges as a pivotal alternative following reduced lending from China and rising costs associated with Eurobonds. Since his inauguration in October 2022, President William Ruto has sought to bolster trade relations with the UAE, reflecting a strategy towards diversified financing avenues for economic development.
The structured loan from the UAE, agreed upon last year, entails an interest rate of 8.25%, with repayments scheduled in $500 million increments due in 2032, 2034, and 2036. Mbadi explained, “We can use it partly for liability management, partly for budgetary support, or exclusively for budgetary support.” Furthermore, Kenya aims to allocate $900 million from the recent bond issuance to repurchase a Eurobond maturing in 2027.
In conclusion, Kenya’s strategic decision to postpone drawing funds from the UAE loan aims to enhance its fiscal management amid rising debt costs. This approach is part of a broader strategy to engage with international financial institutions while seeking to stabilize the nation’s economy. The forthcoming financial arrangements reflect Kenya’s efforts to navigate its budgetary challenges effectively and ensure sustainable economic growth moving forward.
Original Source: eastleighvoice.co.ke
