Kenya’s President William Ruto, during the United Nations Climate Change Conference (COP28) in Dubai, announced plans to initiate a buyback of at least part of the country’s $2 billion Eurobond in February or March. This move comes as the nation addresses concerns about its financial stability amidst falling hard currency reserves, local currency weakening, and revenue challenges.
The Eurobond, set to mature in June, has been a point of contention regarding Kenya’s ability to manage its debts. In November, President Ruto informed the parliament of his intention to buy back $300 million of the bond before the end of 2023. However, following advice from the government’s transaction advisers, this decision was postponed.
“What they have recommended is that we do a buyback in February or March, and then we go to the market,” Ruto stated during an interview in Rome at the Italy-Africa summit. He expressed confidence in the advisers’ recommendation, noting, “Thank God they were right. The markets have opened for Kenya, as they have for most other countries.”
The yields on dollar bonds issued by frontier economies like Kenya have seen fluctuations, primarily driven by concerns over heavy indebtedness and high interest rates in advanced economies. However, in recent months, these yields have started to decrease. This trend was exemplified by the Ivory Coast, which successfully raised $2.6 billion this month through oversubscribed bonds.
Additionally, President Ruto mentioned a shift in Kenya’s approach to securing external financing. Initially, the Trade and Development Bank (TDB), an African development finance institution, was to organize a $1 billion syndicated loan for Kenya. Although TDB has already lent Kenya $210 million of that amount, the remaining funds have yet to be delivered.
“Because of the situation that we now see in the market, we believe that it would be a lot easier for us to raise that money in the market rather than through syndication,” Ruto explained. This change in strategy reflects Kenya’s adaptation to the dynamic global financial market and its efforts to secure more favorable terms for its debt management.
President Ruto’s announcements come at a crucial time for Kenya as the country navigates its economic challenges. The planned Eurobond buyback and the new approach to securing external financing are key components of the government’s strategy to ensure economic stability and manage its debt responsibly.
