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Ruto gives new timelines for $2 billion Eurobond repayment

The government had intended to do the buy back in December 2023 buy the government abandoned the plan after transactions advisors ruled against it

President William Ruto during a meeting with the Director General of the Food and Agriculture Organisation Qu Dongyu, in Rome, Italy

President William Ruto has once again committed to a buyback of the $2 billion Eurobond but this time in February or March.

President Ruto first made the announcement in November 2023, saying the government would buy back the first $300 million by December but by the end of the year, the government had only paid $68.7 million in interest.

The Eurobond is due in June 2024, but according to the head of state, Kenya now intends to buy back the bond in February or March.

He explained that government's transaction advisers who were against the December buyback have given the greenlight for the state to proceed with the plan.

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"What they have recommended is we do a buyback in February, March, and then we go to the market," President Ruto said during an interview on the sidelines of the Italy-Africa summit.

Moody's Investors Service had indicated in 2023, that a buyback at a price below the bond's par value might be considered a default, highlighting the complexity and potential risks of this financial strategy.

This decision is part of the government's effort to manage its debt obligations more effectively.

The buyback plan signals a strategic move to address concerns about Kenya's financial stability and its ability to meet future debt payments.

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Kenya's journey with the Eurobond began in 2014 under the then Jubilee administration, which issued a 10-year bond at 6.78 percent interest to fund various infrastructure projects.

This issuance was part of a larger strategy that included a $2.75 billion borrowing in two tranches – the other being a five-year issuance at 5.87 percent.

The five-year paper was later partly repaid using proceeds from another $2.1 billion Eurobond issued in May 2019.

Kenya's foreign exchange reserves have seen a decline, dropping to $7.08 billion, which is below the Central Bank’s statutory requirement of at least four months of import cover.

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Furthermore, the country is grappling with a substantial budget deficit, with approximately half of its revenue collections earmarked for debt repayment.

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