Eurobond: Inside Ruto's 2024 roadmap to avoid Sh302b economic catastrophe

IMF Managing Director Kristalina Georgieva. [Courtesy]

Facing difficulties

IMF Managing Director Kristalina Georgieva told Financial Standard in a recent interview that the global lender does not see Kenya facing any difficulties in paying up the Eurobond.

"We do not see Kenya facing difficulties to serve the $2 billion next year. Why? First, because reserves are still quite sound," she said.

"The country has some $6 billion (Sh906 billion) in reserves, and it has been taking very prudent measures both on the fiscal front and on the monetary policy side to make sure that this reserve position remains sound. Second, Kenya can raise money through syndicated loans or other ways, including from us, the IMF."

Her view was recently echoed by the AfDB in a separate interview.

"I don't think President William Ruto and his team would want anything like a default. It would be very catastrophic both financially and politically, and I know they are doing all that is within their power to circumvent that," AfDB Director-General for East Africa Nnenna Lily Nwabufo told Financial Standard recently.

AfDB Director-General for East Africa Nnenna Lily Nwabufo. [Courtesy]

Kenya has for years, been on a path of debt accumulation, amid red flags from global lenders, ratings agencies and even internal warnings from Treasury mandarins. Due to these budget deficits, successive Kenyan governments have had to resort to debt, by issuing dollar-denominated bonds (Eurobonds) on international markets.

In addition, growth has been slower than the rise of debt, and therefore the Kenyan debt burden has become every year harder to bear.

Kenya's public debt hit Sh10.58 trillion in September, with the National Treasury revealing that both domestic and external liabilities have risen rapidly under the government.

The elevation of the public debt points to a sustained borrowing appetite by the Kenya Kwanza government and the impact of the weakening shilling against foreign currencies.

The debt levels have grown at a time when Treasury has acknowledged Kenya's headroom for more public borrowing is narrowing in a move expected to pile pressure on the taxman to raise more funds for servicing public debt.

"As of September 31, 2023, gross public debt increased by Sh310.0 billion to Sh10.58 trillion compared to Sh10.27 trillion at the end of June 2023," said National Treasury Principle Secretary Chris Kiptoo in a presentation before the National Assembly's Public Debt and Privatisation Committee.

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