Kenya’s central bank governor Kamau Thugge revealed plans to repurchase up to a quarter of the country’s $2 billion Eurobond maturing in 2024, according to an exclusive interview with Reuters on the sidelines of the World Bank and IMF annual meetings in Marrakech.
Thugge said the bond repurchase or buyback programme aims to ease investor concerns about Kenya’s ability to repay its looming debt obligations. The buyback will be financed by new commercial loans worth $500 million to $1 billion that Kenya is currently negotiating with two African regional banks – Trade & Development Bank and African Export-Import Bank.
“We would use part of that for the buyback, for the liability management, and the rest would be for the budget support,” Thugge told Reuters, after stating earlier this month that Kenya was looking to “progressively reduce the liability of the Eurobond.”
“We would like to start as quickly as possible,” he added, underscoring the urgency of the buyback plans.
Thugge’s comments come as Kenya faces surging debt repayments, a weakening local currency and soaring yields on its international bonds – factors that have shut many developing countries out of offshore capital markets.
The governor revealed Kenya is also negotiating with the IMF to increase the size of its current loan program, which is undergoing a sixth review in November. It is also asking the World Bank for additional funds on top of a $750 million loan planned for March next year.
“We don’t mind actually asking for exceptional access,” Thugge told Reuters regarding IMF funding. “Of course it has additional conditionalities and requirements, but the kind of reforms we are undertaking… we can put that on the table.”
Accessing more IMF financing above Kenya’s normal loan limits would require approval for ‘exceptional access’. This would mark the third expansion of the current $2.3 billion IMF loan program approved in 2021 if greenlighted.
Even if Kenya is unable to issue new Eurobonds and has to repay the $2 billion 2024 bond by drawing down its foreign exchange reserves, Thugge projects reserves would still stand at around $7 billion by end-June 2024.
As of October 5, the central bank reported usable forex reserves of $6.9 billion, sufficient to cover approximately 3.7 months of imports.
