Kenya’s government announced on Thursday the successful buyback of $1.443 billion worth of its $2 billion international bond maturing in June.
This news follows a tender offer launched last week and aims to ease investor concerns about the country’s ability to repay its debts.
The East African nation has faced scrutiny due to its strained public finances, raising fears of a potential default on the upcoming bond.
To address these concerns, Kenya issued a new $1.5 billion Eurobond this week, albeit at a high cost, specifically to fund the partial buyback.
According to a regulatory notice, the government secured bids exceeding the maximum offer announced earlier, allowing them to repurchase slightly more than 72% of the maturing bond.
Investors will receive the face value of their holdings along with accrued interest.
This move has spurred positive sentiment, leading to a recent strengthening of the Kenyan shilling.
On Thursday, the currency reached its highest level against the dollar since June 2023. However, underlying anxieties remain.
The double-digit yield offered on the new Eurobond indicates that international investors still perceive Kenya as a relatively risky bet.
Adding to the complexity, the government’s financial pressures have led to increased taxation, drawing criticism from citizens who were promised lower living costs.
Despite these domestic challenges, Kenya enjoys continued support from the international community, with the International Monetary Fund increasing its backing program by $941 million in January.
The partial buyback represents a strategic manoeuvre by the Kenyan government to manage its debt obligations and stabilize investor confidence.
However, the high cost of the new bond issuance and persistent economic pressures highlight the delicate path the country navigates as it seeks to secure its financial future.
