2023-10-12 04:00:00
Kenya plans to buy back up to a quarter of its $2 billion 2024 international bond before the end of the year following securing new loans, central bank Governor Kamau Thugge told Archyde.com, a move aimed at to ease concerns regarding the country’s ability to repay looming debt.
The country is in talks to raise between $500 million and $1 billion in commercial loans from two regional banks, the Trade & Development Bank and the African Export-Import Bank, Thugge said in a sideline interview World Bank and IMF meetings in Marrakech.
“We will use part of this amount for buyback, for liability management, and the rest for budgetary support,” said Mr. Thugge, who indicated earlier this month that Kenya expected to “gradually reduce the liabilities of the Eurobond”.
“We would like to start as quickly as possible,” he said of the takeover.
Kenya’s approach to repaying the $2 billion 2024 bond is being closely watched by foreign investors, given rising debt repayments, a weakening currency and soaring bond yields, which have excluded many developing countries from international capital markets.
Mr Thugge said Kenya was also in talks with the International Monetary Fund (IMF) for an “escalation” of its lending programme, which will undergo a sixth review in November, and with the World Bank to complete a $750 million loan scheduled for March.
“We have no problem requesting exceptional access,” the governor added. “Of course there are additional conditions and requirements, but the type of reforms we are undertaking…we can put that on the table.”
The exceptional access would allow Kenya to request an amount above its IMF financing limit. If additional funds are approved, it will be the third increase to the loan program, which was initially set at $2.3 billion in 2021.
If Kenya remains unable to issue new international bonds and must repay the $2 billion from its foreign currency reserves, these would still stand at around $7 billion at the end of June 2024 , said Mr. Thugge.
As of October 5, the central bank said it had $6.9 billion in usable foreign exchange reserves, which is enough to cover regarding 3.7 months of imports.
The central bank kept its main interest rate at 10.5% on October 3. Inflation edged up to 6.8% in September from 6.7% the previous month, following falling below the 7.5% target in June for the first time in a year.
“We are still under pressure on the exchange rate, so we would like to at least keep interest rates at their current level for a while,” Thugge said, declining to specify a timetable.
If inflation rises above 7.5%, he added, “we will take action to address it.”
“If it goes back down to 5% and the pressure on the exchange rate decreases, then we can consider lowering the interest rate.
Despite debt pressures, Kenya’s economy is expected to grow 5.5% this year and regarding 6% in 2024, Thugge said, which is higher than the IMF’s forecast for sub-Saharan Africa. which are 3.3% and 4% respectively. (Reporting by Rachel Savage and Jorgelina do Rosario; Additional reporting by Duncan Miriri in Nairobi; Editing by Karin Strohecker, Elisa Martinuzzi and Jan Harvey)
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