Amid a bustling Nairobi on February 5, 2025, Kenya’s Finance Minister, John Mbadi, shared insights with Reuters during a revealing interview. Nestled in the heart of the busy capital, Mbadi’s gestures punctuated his anticipation of Kenya’s ongoing talks with the International Monetary Fund (IMF). What do these discussions entail? And how do they shape Kenya’s future?
Kenya, positioned as a pivotal East African nation, is deftly navigating its fiscal landscape. Imagine a country poised at the crossroads of traditional financing and innovative approaches to economic management. As Mbadi explained, all eyes are on the $1.5 billion bond sourced from the United Arab Emirates (UAE). This bond, however, is a peculiar puzzle piece, set to fall perfectly within Kenya’s budget for the financial year — a move illustrating strategic patience.
In recent years, Kenya’s financial terrain has been rocky, akin to many nations facing escalating debt service costs. Armed with a problem-solving ethos, the government has tackled this predicament head-on. Reflecting on their borrowing journey, Kenya is in the midst of recalibrating its financial compass. Many are curious: How will IMF’s new lending programme unfold once the current agreement sunsets in April? Will this serve as a financier or merely a facilitator for impactful changes?
John Mbadi articulated this sentiment, stating, “The reason why we have not done it is that we have to do it within our fiscal framework.” His words paint a vivid picture of a leader who understands the weight of fiscal responsibility. Kenya, indeed, has taken deliberate steps — raising another $1.5 billion through a novel 10-year dollar bond. This week, Kenya aimed to seamlessly manage forthcoming debt maturities, upping its financial game.
Further dipping into external reserves, the nation anticipates over $950 million by the close of June from global benefactors. Including stalwarts like the World Bank and African Development Bank, alongside Italy and Germany, the coalition underscores a robust external endorsement for Kenya’s fiscal strategy. During a phone call from Nairobi, Mbadi disclosed, “We are still holding out to see exactly how much budget gap we will still have from the external finances before we draw the (UAE) money.” The local fiscal calendar dances between July and June, contrasting with fiscal cycles elsewhere.
Diversification marks Kenya’s borrowing from the UAE, where new avenues for sourcing funds emerged as China reduced its financing footprint on the continent. Meanwhile, elevated Eurobond yields created hurdles for frontier nations. Against this backdrop, President William Ruto has actively finessed diplomatic ties with the UAE since taking office in October 2022, crafting bonds with a greater strategic purpose.
Agreed upon last year, the UAE’s financial arrangement features an 8.25% interest rate, payable in tranches of $500 million in the years 2032, 2034, and 2036. Mbadi discussed its applicability across budgetary needs and liability management, emphasizing prudent fiscal choices in the present stakes for the nation’s economic outlook. His statement, “We can use it partly for liability management, partly for budgetary support, or exclusively for budgetary support,” provides a synopsis of the flexibility embedded within this financial tool.
Of note, the $1.5 billion bond issuance from this week will see $900 million directed towards repurchasing a Eurobond due in 2027, with the remnant catering to maturing syndicated loans scheduled for redemption later this year. It’s a deft structural shift, showcasing financial sagacity in an era of global economic complexity.
Through the lens of these events, Kenya’s fiscal maneuvering reflects a dexterity reminiscent of an adept chess player, strategically aligning pieces as the world watches with bated breath.
Written By Duncan Miriri
Editing By Gareth Jones
Edited By Ali Musa
Axadle Times International Monitoring
