Kenya taps Citi, Standard for advice on crucial $2bn Eurobond maturity

AFRICAN BUSINESS AND ECONOMYOctober 4, 2023 at 11:22 AM UTC

Kenya's government has chosen Citi and South Africa's Standard Group as advisors to help navigate the handling of a $2 billion Eurobond set to mature in June 2024, as confirmed by a senior finance ministry official on Monday.

This decision comes at a challenging juncture for the East African nation, as it faces the task of repaying or refinancing this 10-year bond amidst a backdrop of surging yields that have effectively limited access to the market for many frontier economies.

Additionally, concerns have been raised due to Kenya's debt burden and the weakening of its currency, the Kenyan Shilling (KES). According to World Bank data, Kenya's total public debt amounted to 67.4% of its gross domestic product at the end of the previous year, underscoring the need for a strategic approach to manage the maturing bond.

Key Takeaways

Kenya's public debt burden is indeed substantial but remains within a reasonable context when compared to its peer group. However, the composition of the external debt introduces challenges, as it leads to relatively high servicing costs, according to the Economist Intelligence Unit. In 2022, external debt pressures escalated due to several factors, including the stringent monetary policy measures taken by the United States and the Russia-Ukraine conflict. These events triggered a surge in yields on Kenya's six active Eurobonds, which have a combined value of $7.1 billion. The spike in yields forced Kenya to cancel a planned $1 billion Eurobond issuance in mid-2022, resulting in pressures on foreign exchange reserves and a more rapid depreciation of the exchange rate. This depreciation, in turn, has increased the cost of servicing foreign debt. Kenya continues to benefit from substantial support from the IMF and the World Bank but a potential critical point is on the horizon in June 2024 when the ten-year Eurobond is due for repayment.