Kenya is in talks with the UAE about a $1.5 billion business loan, the finance minister says

Kenya is talking with the UAE about getting a $1.5 billion business loan with a 7.25 percent interest rate and a term of seven years, Kenya’s Finance Minister John Mbadi said on Wednesday.

After dangerous protests forced the government to back down on a plan to raise taxes and delay payments from the International Monetary Fund (IMF), the East African country is looking for other ways to get money. Reuters reported last month on the possible loan.

“This loan is cheaper than the Eurobond we borrowed at 10.7%,” Mbadi said at a news conference, referring to a January bond worth $1.5 billion that was released to buy back some of a $2 billion Eurobond that was coming due.

The minister said that the government is in talks with the IMF because the lender had some worries about the possible commercial loan from the UAE.

“There are issues to be discussed, including with the IMF, which had expressed some reservations, because we are talking about this being an external loan and is dollar denominated, it may expose us to additional risk,” he added.

Mbadi said the government had said that the loan was cheaper than the other choices, which included Eurobonds.

“Those are the issues we are talking about. It’s not official yet. “We’re looking for a transaction adviser for that,” he said.

This financial year, the government wants to borrow 168 billion shillings ($1.31 billion) from other countries. If the UAE loan goes through, it will bring in 195 billion shillings, which will help the government borrow less from other countries.

To help businesses and the economy grow, Mbadi said, President William Ruto’s government has made lowering the high loan rates a top priority.

The standard lending rate from the central bank was lowered by 75 basis points last week to 12%. However, Mbadi said that this was still too high because it should be 10% or lower.

Kenya has become more friendly with the UAE since Ruto took office in September 2022.

Two of the Gulf companies that Ruto’s government chose last year to supply Kenya with oil on longer credit terms were the Abu Dhabi National Oil Company (ADNOC) in the UAE and the Emirates National Oil Company. This was a change from the old open bidding system.

In 2018, the UAE gave Ethiopia $1 billion to help it get through a serious cash flow crisis. In July, the central banks of both countries announced a $817 million swap line.

Earlier this year, the UAE also made a deal with Egypt to develop a great part of Egypt’s Mediterranean coast. The deal was meant to bring $35 billions of dollars into Egypt’s economy.

It costs $1 to buy something in Kenya.