Kenya shelves plan to buy back $2 billion Eurobond due in 2024

Kenya shelves plan to buy back $2 billion Eurobond due in 2024

Kenya’s National Treasury has abandoned its plan to buy back part of the $2 billion Eurobond that matures in June 2024, saying that investors are not willing to sell before the bond’s maturity date.

The Treasury had earlier indicated that it would repurchase at least half of the bond before the end of 2023, as part of its debt management strategy.

Investors confident in Kenya’s fiscal policy

Treasury Director of Debt Management Haron Sirma told The EastAfrican that the lack of interest from investors to sell their bonds reflects their strong confidence in the government’s fiscal policy stance. He said that the government cannot force investors to sell their bonds, and that it would explore other options to repay the bond in 2024.

“Buy back is one of the strategies for 2024 but doubt whether investors are willing to sell before maturity of the bonds. It reflects strong investor confidence on government fiscal policy stance. You can’t force investors to sell,” Mr Sirma said.

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Kenya faces debt repayment crunch in 2024

The 10-year bond, which was issued in 2014 at an interest rate of 6.78 percent, was meant to fund infrastructure projects under the then Jubilee administration. However, the bond has seen its yield rise to as high as 22 percent in July 2023, amid concerns over Kenya’s debt sustainability and political uncertainty ahead of the 2023 general election.

According to data from the Central Bank of Kenya, the yield on the bond has fallen to 11 percent as of February 2, 2023, indicating some improvement in investor sentiment. However, Kenya still faces a potential debt repayment crunch in June 2024, when it will need to repay the $2 billion principal amount, unless it can refinance it at a lower cost or secure alternative loans.

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Kenya seeks transaction advisers for new Eurobond

The EastAfrican reported that Kenya plans to raise up to $2 billion from the international capital markets in the next financial year, starting from July 1, 2023, to repay its 2024 Eurobond. The Treasury has invited bids from transaction advisers for the new Eurobond, which will be Kenya’s fifth sovereign bond since 2014.

President William Ruto, who succeeded President Uhuru Kenyatta, has pledged to reduce Kenya’s public debt burden and improve its fiscal discipline. He has also vowed to boost economic growth and create jobs for the youth, who make up about 75 percent of Kenya’s population.

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