By KEPHA MUIRURI

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The approval of $684.7 million disbursement to Kenya yesterday by the International Monetary Fund (IMF) is set to ease concerns over Kenya’s ability to pay its first Eurobond, which matures in June.

The new funds which are expected to hit the accounts of the Central Bank of Kenya (CBK) immediately are part of the $941.2 million from the augmentation/expansion of resources under the fund’s multi-year arrangement with Kenya.

Kenya lobbied for additional resources from the IMF last year, citing heightened balance of payment needs from the upcoming outsized maturity amid difficulties in accessing alternative funding from the international capital markets.

The IMF has acknowledged the pressure in approving the additional funds to Kenya noting the government has fewer options in fully refinancing the maturity expected on June 24.

Read: Inside IMF’s zero-interest funding to Kenya

“Urgent balance of payments need tos have emerged, primarily due to the $2 billion Eurobond maturing in June 2024 as prior expectation of a full roll-over via a bond issuance at a reasonable cost is unlikely to materialise under the prevailing global bond market conditions,” the IMF said yesterday. Besides leveraging IMF funding, the government has been seeking additional concessional funding from other sources including the World Bank, alongside syndicated loans.

The National Treasury has for instance disclosed that it expects €88 million ($95 million) from the African Development Bank while a syndicated loan is expected from the Trade and Development Bank.

The expansion of funding has seen the triggering of exceptional access to the general resource allocation at the fund and policy safeguards for high combined credit.

Kenya has struggled to return to the international capital markets since last issuing a Eurobond in June 2021.

Plans to issue a Eurobond by June 2022 were cancelled as general market conditions become unfavourable as global interest rates rose along with the onset of the Russia-Ukraine War.

The National Treasury has been stepping up efforts towards securing the Eurobond’s refinancing and selected Citi and Standard banks as lead managers last year to explore the scope of issuing in the Eurobond market at a reasonable cost. Moreover, the government considered and planned a partial early buyback of the bond holders last year but the move failed to materialise.

The early buyback was expected to break-up the outsized maturity to smaller bits, spreading out payments through to June 27 with the Central Bank of Kenya previously hinting at the use of forex reserves to clear the balance left behind after the utilisation of concessional funds.

Total disbursements under the EFF/ECF arrangements are expected to now stand at Sh418 billion.