Kenya settled the balance of $560 million (Sh72 billion) of 2014 Eurobonds using part of the proceeds from a $1.2 billion World Bank loan, the Central Bank of Kenya said.
The debt, which was due on June 14, was settled on Friday, along with the latest semi-annual interest payment of $19.25 million (Sh2.48 billion) that was due to bondholders for the six months to June 2024.
The settlement officially closed the chapter on Kenya’s debut Eurobond issuance in June 2014 which raised a total of $2.75 billion (Sh366.7 billion at today’s exchange rate) from two terms of five years ($750 million) and 10 years ($2 billion).
The Governor of the Central Bank of Kuwait said: “Of the $500 million balance due on Monday, we will make the payment today and we have the resources that enable us to make the payment on Monday, and this will be the end of the episode for euro bonds.” Kamau Thug told The daily business Friday.
The five-year bonds were repaid in June 2019, and in February this year, the government repurchased $1.44 billion worth of bonds on 10-year notes using the proceeds of the new issue sold at the same time.
Prior to the buyback, there was uncertainty in the financial market about how the government intended to handle the initial payment at the end of the bond’s life. The uncertainty has increased pressure on the shilling, whose exchange rate against the dollar fell to an all-time low of 161 shillings in mid-February.
Following the buyback, the currency appreciated against the dollar and is currently trading at an average of Sh128.63.
“A lot of the risks that people were seeing in terms of eurobonds after the repo have evaporated as resources became available, as we were expecting money from the World Bank and the IMF,” Dr. Thug said.
A $1.2 billion World Bank loan was approved at the end of May and is effectively available for withdrawal by the Treasury.
The Treasury, upon receiving proceeds from external loans, usually sells dollars to the Central Bank of Kuwait in exchange for shillings for use in the local economy. Likewise, it obtains dollars from the Central Bank of Kuwait to settle external obligations, which include public loan payments.
The dollars sold by the Treasury to the Central Bank of Kuwait were later reflected in the Central Bank of Kuwait’s official foreign exchange reserves. The Central Bank of Kuwait indicated in its latest weekly bulletin that its reserves rose by $1.31 billion to $8.32 billion in the period from June 13 to 20, indicating that the proceeds of the World Bank loan have reached its foreign exchange account.
Earlier, the Central Bank of Kuwait said that part of these proceeds will work to settle the balance of Eurobonds, and the rest is expected to go toward spending the government budget.
