Kenya has postponed tapping into a $1.5 billion privately placed bond from the United Arab Emirates (UAE), opting to ensure the funds fit within its broader fiscal strategy as the country grapples with rising debt service costs, Finance Minister John Mbadi said on Friday.
The decision follows years of heavy borrowing that have strained Kenya’s public finances. The government is working to stabilize its debt position while negotiating a new lending program with the International Monetary Fund (IMF), set to replace the current arrangement expiring in April.
Strategic Delay to Optimize Budget Planning
Mbadi told a Western media outlet that the government is holding off on drawing the UAE loan to better assess its overall external financing needs before utilizing the funds.
“The reason why we have not done it is that we have to do it within our fiscal framework,” he said, emphasizing the need for efficient utilization within Kenya’s budget plans.
The government has already secured $1.5 billion this week through a new 10-year dollar bond, which will help manage upcoming debt maturities. Additionally, Kenya expects to receive over $950 million in funding from the World Bank, African Development Bank, and bilateral partners such as Italy and Germany by the end of June.
“We are still holding out to see exactly how much budget gap we will still have from the external finances before we draw the [UAE] money,” Mbadi explained.
Debt Management and UAE Financing Terms
Kenya plans to allocate $900 million from its latest bond issuance toward repurchasing a Eurobond maturing in 2027, with the remaining funds directed at settling syndicated loans due later this year.
The UAE financing agreement, signed in 2024, carries an 8.25% interest rate and is structured for repayment in three $500 million installments in 2032, 2034, and 2036.
Since taking office in October 2022, President William Ruto has strengthened economic ties with the UAE, making this loan a key component of Kenya’s broader fiscal planning.
