Central Bank of Kenya (CBK) Governor Kamau Thugge has unveiled a plan to repurchase a portion of Kenya’s Eurobond, worth Ksh 74.4 billion. This move comes as the Eurobond, valued at Ksh 298.1 billion, is set to mature in 2024, and the goal is to complete the repurchase before the year’s end.
During discussions at the World Bank and International Monetary Fund (IMF) meetings in Marrakech, Thugge explained that the Ksh 74.4 billion payment is part of a broader strategy to acquire new loans. This strategy is designed to address concerns about Kenya’s ability to meet its loan obligations.
CBK is actively in talks with two commercial banks to secure loans ranging from Ksh 74.4 billion to Ksh 149 billion. A portion of these funds will be used for the Eurobond repurchase, liability management, and the remaining funds will be allocated to support the national budget.
Governor Thugge emphasized the urgency of this buyback plan, stating, “We would like to start as quickly as possible.”
In addition to these plans, Thugge revealed that ongoing discussions are taking place with the IMF to enhance Kenya’s loan program, which is scheduled for review in November. Negotiations with the World Bank for a Ksh 111.7 billion cash injection in March 2024 are also underway. Thugge expressed openness to requesting “exceptional access” from the IMF, which would allow for a funding limit beyond the typical cap.
Thugge’s disclosure regarding the Eurobond repurchase plan follows previous statements from the National Treasury expressing reservations about the repurchase, citing strong investor confidence in the government’s fiscal policy stance. This skepticism was shared by investors, who believed that a buyback might be seen as a default on the loan and result in financial losses for them.
While investors raised concerns about potential economic losses in a distressed exchange, Moody’s Investors Services’ vice president and senior credit officer, David Rogovic, noted that the assessment of whether the buyback constitutes a distressed exchange and a default would depend on the specific terms and details of the repurchase.
It is important to note that the Eurobond repurchase has been a topic of discussion in Kenya for several months, with differing opinions on its potential impact.
