Kenya will wait to draw down $1.5b UAE loan, finance minister says

Treasury Cabinet Secretary John Mbadi. He has been summoned by MPs over eCitizen revenue control, pension delays. (Photo: National Treasury)

By Reuters
Friday, February 28, 2025

Kenya will wait to draw cash from a $1.5 billion privately placed bond in the United Arab Emirates so that it can fit into its budget plans for this financial year, Finance Minister John Mbadi said on Friday.

Following a borrowing spree, the East African nation has struggled with a surge in debt service costs in recent years and is seeking to solidify its financing. Meanwhile, talks are underway with the International Monetary Fund over a new lending program once the current one expires in April.

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"The reason we haven't done it is because we have to do it within our fiscal framework," Mbadi told Reuters, referring to tapping cash from the UAE loan.

Kenya has also raised $1.5 billion in a new 10-year dollar bond this week to manage upcoming maturities.

By the end of June, Mbadi added, the government is expecting more than $950 million in funding from other external sources, including the World Bank, the African Development Bank, Italy and Germany.

"We are still holding out to see exactly how much of a budget gap we will still have from the external finances before we draw the UAE money," said Mbadi, speaking by phone from Nairobi.

The country's fiscal year runs from July 1 till June 30.

Kenya's move to borrow from the UAE marks a new source of funding after China scaled back its lending to Africa and a surge in Eurobond yields hindered frontier issuers.

Kenyan President William Ruto has also moved to strengthen trade ties with the UAE since taking office in October 2022.

The UAE's lending, agreed upon last year, has an 8.25% interest rate and will be repaid in $500 million installments in 2032, 2034, and 2036, Mbadi said.

"We can use it partly for liability management, partly for budgetary support, or exclusively for budgetary support," he said.

The government will use $900 million of the $1.5 billion bond issued this week to buy back a 2027-maturing Eurobond, Mbadi said, and will use the balance to retire syndicated loans that are falling due later this year.