Otiato GuguyuKenyan government has announced it will return to the Eurobond markets to buy back its outstanding $1 billion Kes129 billion notes due February 2028.
According to the offer published in the London Socks market, Kenya is making the buyback, as part of the proactive management of external indebtedness, specifically to smooth out the maturity profile of its Notes.
Just days after inviting the International Monetary Fund for talks in Nairobi, this move may give Nairobi leverage for the programme talks, as the buyback offer will further ease the balance of payments shocks that drove Kenya to the Fund programme in 2020.
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Kenya failed the ninth review of the previous IMF programme signed in 2020 during the Covid-19 pandemic to save the country from defaulting on its dollar loans after tourist receipts and flower exports faltered.
Failed reforms
Implementation of the proramme under President Uhuru Kenyatta made him unpopular enough to lose support for his preferred candidate in his own home town polling station.
His deputy, now president, Dr William Ruto took over the programme and unleashed its worst clauses, radical tax targets to achieve an impossible primary balance, triggering the June25 Finance Bill revolt and forcing him into political realignments for survival. President Ruto then cancelled the programme before completion.
The IMF staff team, led by Haimanot Teferra, mission chief for Kenya returned to Nairobi on invitation of President William Ruto to negotiate his own programme which may determine his re-election in two years.
Reforms without programme?
Churchill Ogutu an Economist at IC Group, says he does not think the present negotiations will lead to a deal given that Kenya would find it hard to implement the Fund’s reforms as we approach an election.
He said that from our history with the IMF the last programme was cancelled back in April because of fiscal reforms and structural benchmarks that were difficult to meet under the current economy.
Other analysts say Kenya may move towards Nigerian-type market reforms without an outright IMF programme, but still needs the Fund’s endorsement to buy credibility in the market.
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