Imf Exit And Eurobonds Raise Questions Over Kenyan Debt

Kenya's move to tap the commercial debt markets in February, and the country's early exit from an IMF programme in March, has sparked renewed debate on how the country is tackling its debts.

Kenya floated an 11-year 1.5bn eurobond to finance the early retirement of a 900m note maturing in 2027. A total of 593.3m from the proceeds of this issuance was used to partially buy back the 900m note, while the balance was earmarked for the repayment of syndicated commercial debts due in March, the Treasury said.

Further questions were raised about the country's debt profile when it was announced in March that Kenya will exit its 3.6bn IMF programme before the final review stage, which would have unlocked a remaining tranche of 850m. Reports suggest that the Fund was unimpressed with progress made by Kenya to curb spending and improve tax collection.

Together, the moves appear to be a further sign of Kenya shifting towards commercial sources of funding. Last February, Kenya also sold 1.5bn of Eurobonds to partially retire a maturing 2bn note. The next significant sovereign maturity is a 1bn bond due in 2028. It is estimated that Kenya needs about 26bn over the next decade to settle maturing foreign debt and another 1.5bn annually to service external interest payments.

Kenya's external debt in January stood at 39.4bn while domestic debt was Sh5.93tn 45.8bn, according to the budget policy statement presented by the Treasury to Parliament in March. Multilateral lenders such as the IMF and World Bank accounted for 55.6 of external debt, while bilateral lenders led by China held 21.4 of external debt. Commercial loans, the bulk of which include Eurobonds, surpassed bilateral loans, with a 23 share of external debt.