Kenya to Wait Before Drawing Down $1.5B UAE Loan, Minister Says

Photo : Reuters

Kenya has decided to wait before using the $1.5 billion loan from the United Arab Emirates (UAE). The government wants to make sure the money fits into its budget for this financial year, Finance Minister John Mbadi said on Friday.

In recent years, Kenya has faced challenges in repaying its debts after borrowing heavily. Now, the country is trying to manage its finances better. At the same time, Kenya is in talks with the International Monetary Fund (IMF) for a new loan program, as the current one will end in April.

Mbadi told Reuters that the reason for the delay is to ensure the loan is used within Kenya’s financial plans. Meanwhile, Kenya raised $1.5 billion this week by selling a new 10-year bond in U.S. dollars to help manage its upcoming debt payments.

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By the end of June, Kenya expects to receive over $950 million from other international sources, including the World Bank, the African Development Bank, Italy, and Germany. Mbadi said the government is waiting to see how much money it still needs before using the UAE loan.

Kenya’s financial year runs from July 1 to June 30. The decision to borrow from the UAE is part of a new approach, as China has reduced its lending to Africa, and higher interest rates have made it harder for African countries to borrow from international markets.

Since taking office in October 2022, President William Ruto has strengthened Kenya’s trade relationship with the UAE. The loan agreement with the UAE was made last year, and it comes with an 8.25% interest rate. Kenya will repay the loan in three installments of $500 million each in 2032, 2034, and 2036.

According to Mbadi, the government can use the money for debt repayment, budget support, or a combination of both. From the $1.5 billion raised this week, Kenya will use $900 million to buy back a Eurobond that is due in 2027. The remaining amount will go towards paying off other loans that are due later this year.

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