Kenya Begins Discussions with IMF, World Bank on Repaying Eurobonds

In order to pay off the $2.0 billion (Sh297.6 billion) Eurobond that is due in June 2024, Kenya has begun discussions with the International Monetary Fund (IMF) and other development financial organizations for a new loan.

Following market volatility that made issuing new debt to refinance expiring debt an unlikely solution to satisfy the maturity, which is due in eight months, the government is turning to multilateral institutions.

According to Catherine Pattillo, the IMF’s deputy director for Africa, the request for more finance and the amount Kenya is requesting will be a major topic at the upcoming review mission, which is anticipated in December.

Kenya has so far taken out Sh312.5 billion ($2.1 billion) from the ongoing IMF program, including the second-largest withdrawal of $410.0 million ($61.0 billion), which the Fund’s executive board approved after the fifth review was completed in the middle of this year. The program for Kenya was extended by the fund by 10 months, ending in April 2025.

“For Kenya, the authorities are steadfastly addressing this and collaborating with us in the IMF, the World Bank and other donors to further strengthen their economic programmer which they have been very much committed to and they are working to secure additional funding while implementing fiscal measures to address some of the funding requirements,” Pattillo says.

“Working with us, we will have an upcoming review mission and the team will be in dialogue with the authorities and other donors to continue to develop a programme that’s going to help implement those reforms. Those reforms are intended both to reduce debt vulnerabilities and ultimately help Kenya in regaining access to the markets,” the IMF official says.

This IMF disclosure comes as Citi and Standard Bank have been named as the principal arrangers for Kenya’s upcoming return to the international bond markets for a new Eurobond. According to the Central Bank of Kenya (CBK), the government is more inclined to use concessional financing to pay the maturing obligation.

“Currently, the credit market conditions are not favorable for refinancing the Eurobond. We have been engaging our lead managers and lead advisers on how to address the issue of the 2024 Eurobond. We have looked at several options, we are talking with multilateral institutions, the World Bank and the IMF, to see how much additional resources they can make available to us,” CBK Governor Kamau Thugge said on October 4.

If Kenya is successful in obtaining more funding from the development finance institutions, it will be the most recent in a line of extensions to current initiatives that have allowed the nation to access more affordable credit from the Bretton Woods organizations.

Kenya accessed a $1.0 billion (Sh148.8 billion) credit facility from the World Bank in May; the original amount was $750.0 million (Sh111.6 billion), but this amount was increased to account for Kenya’s needs for budget support.

Kenya’s current program received an extra of $551.4 million (Sh82.0 billion) under the IMF’s Resilience and Sustainability Facility at the program’s fifth review in July. The IMF revised Kenya’s GDP growth outlook for 2023 from 5.3 percent to 5.0 percent in its most recent forecast.

Additionally, the fund slightly lowered Kenya’s 2024 growth forecast from 5.4 percent in April to 5.3 percent. This occurs at a time when international investors are looking for returns of more than 18 percent on their investments in Kenya’s Eurobond, signaling a rise in the likelihood of a sovereign default.