Kenya has secured a $500 million syndicated loan arranged by a consortium of five international lenders, with the proceeds expected to fund ongoing development projects approved in the just-ended financial year.

In a statement issued on Thursday, the lenders said the facility - as previously disclosed - is in two tranches of three and five years, but did not specify the respective amounts allocated to each tranche.

They also did not disclose the interest terms of the syndicated loan.

“The proceeds from the facility will be used by the National Treasury to finance the development projects as per the development budget approved by the Kenyan Parliament for the Fiscal Year 2022/2023,” the lenders said.

The earmarking of the proceeds for the 2022/2023 budget suggests that the funds will be used to settle part of the government's outstanding bills, which stood at Ksh537.2 billion ($3.8 billion) at the end of March 2023. 

The Treasury has been seeking the facility since at least March when it mandated CitiGroup of the US, Standard Chartered Bank of the UK and South African lenders Standard Bank and Rand Merchant Bank to arrange a $600 million facility.

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However, the difficult international credit market has delayed the mobilisation of the funds, mainly due to high interest rates, which have also made it difficult for the country to access the Eurobond market.

In the statement, the four initial arrangers said that the Africa Export-Import Bank (Afrexim Bank) later joined them as book-runner and mandated lead arranger and allocated its subscriptions to the five-year tranche.

The fact that the State fell short of its initial target of $600 million even after bringing on board a fifth arranger points to the difficult external debt market, from which the government expects to raise a net Ksh199 billion ($1.4 billion) in the current fiscal year, while also funding the rollover of the maturing Ksh281 billion ($2 billion) Eurobond.