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Kenya is in talks for a US$1,5 billion loan from Abu Dhabi to help bridge the East African nation’s budget-financing gap, according to people with knowledge of the plans.
The loan will carry an interest rate of about 8,2 percent, according to two of the people, who asked not to be identified as the discussions are private.
That’s lower than prevailing yields for Kenya’s sovereign bonds.
Finer details on the package are still in discussion and may change, the people said. In comparison, the yield on Kenya’s 2031 eurobonds is 9,723 percent, down 21 basis points by 4:33 p.m. in the capital, Nairobi, and little changed from 9,75 percent coupon at issue in February.
It’s the latest in a series of bailouts Abu Dhabi has extended to African countries in recent years — including US$35 billion to Egypt earlier this year — as it seeks to build influence on the continent.
Kenya, which is awaiting a long-delayed US$600 million International Monetary Fund programme disbursement, is in dire need of funds.
The Treasury is walking a financing tightrope after deadly protests forced President William Ruto’s administration to abandon tax measures that would have collected US$2,7 billion this year. As a result, Kenya has widened its budget deficit to 4,3 percent of gross domestic product for the current fiscal year through June from an initial 3,3 percent, potentially breaching IMF-programme targets.
To fill that hole, it plans to take on about US$2,8 billion foreign loans and borrow US$3,2 billion locally.
Kenyan Treasury Secretary John Mbadi didn’t answer calls and text messages to his mobile phone.
The United Arab Emirates’s foreign ministry didn’t respond to an emailed request for comment. The cash from the oil-rich emirate will boost Kenya’s foreign-currency reserves and further buttress the shilling, already one the world’s best-performing currencies against the dollar this year, according to data compiled by Bloomberg.– Bloomberg
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