Kenya’s administration is on the cusp of securing a hefty $1.5 billion loan from the United Arab Emirates at an 8.2% interest rate, aiming to address the financial shortfall plaguing the East African nation, a source in the know told Reuters.
“Kenya is broadening its budget support sources,” noted the insider, hinting that “the deal is practically in the bag.”
The finance ministry and central bank of the UAE didn’t immediately respond to requests for a statement.
Kenya’s Finance Minister John Mbadi and top ministry officials were also unavailable for comment at the time.
The announcement saw Kenya’s dollar-denominated bonds buoy, with the 2048 issue rising by up to 1.89 cents to 84.3 cents on the dollar, according to Tradeweb figures.
After violent protests forced President William Ruto to scrap tax hikes amounting to over 346 billion shillings ($2.7 billion) in June, the government has been grappling to find new financing avenues.
The delay in receiving funds from the International Monetary Fund has added to Kenya’s woes. Consequently, the projected budget deficit is now anticipated to widen to 4.3% of GDP for this fiscal year, up from the originally planned 3.3% before the unrest.
Nairobi is paying a hefty price for financial aid. In February, it floated a $1.5 billion Eurobond to manage debt maturities, bearing a steep 10.375% yield for the seven-year note.
Earlier on Wednesday, Bloomberg reported that Kenya is negotiating a loan deal with Abu Dhabi. Under President Ruto’s leadership, since September 2022, Kenya has forged stronger ties with the UAE.
Last year, Ruto’s administration chose the UAE’s Abu Dhabi National Oil Company (ADNOC) and Emirates National Oil Company, among others, to supply oil on extended credit terms, moving away from an open tender system.
In 2018, the UAE extended a $1 billion lifeline to Ethiopia amid a severe foreign currency crunch. Additionally, both nations’ central banks announced an $817 million swap deal in July.
This year, the UAE inked a deal with Egypt aimed at developing a key stretch of its Mediterranean coastline, projected to funnel $35 billion into the Egyptian economy. ($1 = 128.5000 Kenyan shillings)
This article was reported by Duncan Miriri in Nairobi, with additional reporting by Rachna Uppal in Abu Dhabi and Libby George in London. It was written by Karin Strohecker and edited by Elisa Martinuzzi and Hugh Lawson.
