Kenya successfully paid back $1.5 billion of the 2014 Eurobond, boosting investor confidence and strengthening the local currency. President William Ruto shared this achievement during a Cabinet retreat in Naivasha.

Stronger Shilling, Reduced Debt: President Ruto's Announcement

President Ruto highlighted that the Shilling has gained strength, appreciating from Sh162 to Sh142 against the US dollar. This positive shift has not only reduced overall debt by Sh722 billion but has also cut debt service costs by Sh195 billion over the next six years, leading to significant savings for the country.

Eurobond Financing and Debt Management

President Ruto revealed that the funds used for the buyback were generated through a recently issued Eurobond worth $1.5 billion. This new loan, divided into three installments with a six-year average life, is set to mature in 2031. The bond is priced at 10.37%, marking the highest rate ever offered by an African state.

Background and Impact on Kenya's Economy

Kenya's shilling experienced a notable decline against the US dollar over the past three years, losing about 61% of its value from early 2020 to January this year. This depreciation caused challenges for importers, leading to increased costs for goods, which were then passed on to consumers, affecting the general cost of living.

A weak shilling also strained the country's forex reserves, as importers sought more dollars for payments. As of February 15, foreign exchange reserves stood at $7,031 million, equivalent to 3.8 months of import cover. The weakening shilling also contributed to Kenya's external debt burden, reaching $76.83 billion (Sh11.1 trillion) by December 2023.

Despite these challenges, President Ruto emphasized that the government has implemented strategies for sound debt management. These include diversifying financing sources, managing maturity profiles, and proactively handling debt liabilities to ensure sustainability at all times.

Words in This Article

Positive shift

A positive shift refers to a beneficial change or movement in a particular direction, indicating improvement or advancement in a given situation.

Notable decline

A notable decline signifies a significant and easily noticeable decrease or reduction in a particular value, quantity, or quality, highlighting a substantial downturn or decrease.

Foreign exchange

Foreign exchange, often abbreviated as forex, is the global marketplace where different currencies are traded, facilitating the exchange of one country's currency for another at an agreed-upon exchange rate.