Kenya to use part of World Bank loan to repay debt

Kenya intends to allocate a portion of its World Bank budget support loan to fulfil a payment of approximately $500 million on a Eurobond maturing this month, Reuters Kenyan reported citing central bank governor, Kamau Thugge on Thursday.

The East African nation issued a $1.5 billion international bond in February, incurring significant costs, to finance the repurchase of a substantial portion of the $2 billion bond maturing in June.

Previously, concerns loomed among investors regarding Kenya’s ability to repay the bond due to its strained public finances.

“We do expect some disbursements from the World Bank of about $1.2 billion related to the development policy operations. Part of that … will be used to settle the $500 million of the remaining Eurobond,” remarked Central Bank of Kenya Governor Kamau Thugge during a news conference.

Regarding a World Bank report suggesting another buyback later in the year, Thugge mentioned ongoing discussions between the bank and the Treasury.

Despite recent flooding, the central bank is maintaining its economic growth forecast of 5.7 per cent for this year, citing the resilience of the services sector and strong performance in agriculture.

Kenya’s economy is estimated to decelerate by 5.0 per cent this year, following a 5.6 per cent growth in 2023.

In its recent decision, the central bank retained its benchmark lending rate at 13.0 per cent, emphasising that this stance would help stabilise inflation around the mid-point of its target range in the near term.

Thugge responded to inquiries about potential rate reductions by stating that the bank would consider external factors before determining the direction of its benchmark rate at the appropriate juncture.