Kenya’s finance minister says the country would wait to withdraw its $1.5 billion loan from the UAE

Finance Minister John Mbadi announced on Friday that Kenya will postpone taking money out of a $1.5 billion privately issued bond in the United Arab Emirates in order to include it in its budget projections for this fiscal year.

While negotiations are already underway with the International Monetary Fund over a new lending program once the current one expires in April, the East African nation is looking to put its financing on a more solid footing after struggling with a spike in debt service costs in recent years after going on a borrowing binge.

Speaking to Reuters, Mbadi stated, “The reason why we have not done it is that we have to do it within our fiscal framework,” referring to using funds from the UAE loan.

In order to handle impending maturities, Kenya has also raised $1.5 billion this week through a new 10-year bond.

The government anticipates receiving approximately $950 million in funding by the end of June from other outside sources, such as the World Bank, the African Development Bank, Italy, and Germany, Mbadi continued.

Speaking over the phone from Nairobi, Mbadi stated, “We are still waiting to see exactly how much budget gap we will still have from the external finances before we draw the (UAE) money.”

The fiscal year of the nation begins on July 1 and ends on June 30.

Kenya’s plan to borrow from the UAE represents a new source of capital, after China pared back its lending to Africa and a jump in Eurobond yields stymied border issuers.

Kenyan President William Ruto has also attempted to boost trade ties with the UAE since taking office in October 2022.

According to Mbadi, the UAE loan, which was agreed upon last year, has an interest rate of 8.25% and will be paid back in installments of $500 million in 2032, 2034, and 2036.

“We can use it partly for liability management, partly for budgetary support, or exclusively for budgetary support,” he stated.

According to Mbadi, the government will retire syndicated debts that are due later this year with the remaining $1.5 billion of the $1.5 billion bond that was issued this week, with $900 million going toward the purchase of a 2027-maturing Eurobond.