The government has renewed talks to acquire a Ksh65 billion loan facility from the government of Japan as President William Ruto’s administration seeks to plug deficits in its budget.
Treasury Principal Secretary Chris Kiptoo on Tuesday, October 22, held a meeting with a Japanese delegation on the sidelines of the World Bank Group-IMF Summit in Washington DC, the United States. The discussions centered around the government’s intention to float the Samurai bond, a Japanese-dominated bond.
Speaking after attending the closed-door meeting, the Finance PS disclosed that the proposed acquisition of the multi-billion Yen-dominated loan facility was aimed at diversifying Kenya’s financial sources and achieving a currency mix.
In particular, PS Kiptoo reiterated that the funds would be channelled towards critical government projects such as decarbonization, support for electric vehicle subsidies and boosting the country’s energy capacity.
The loan is projected to fund the upgrading of several outdated transformers and cable lines to reduce the frequent energy losses in Kenya’s transmission network.
Part of the kitty will also be used to fund other infrastructure projects like the Dongo Kundu Special Economic Zone (SEZ) in Kwale County and address funding for the Mombasa Port Area Road Development Project.
The government’s plan to float the Samurai bond was first revealed in February this year when Kenya signed a Memorandum of Understanding (MoU) with Nippon Export and Investment Insurance (NEXI) for the issuance of the bond.
“This agreement (MoU) enables Kenya to issue a Samurai Bond totalling USD500 million (Ksh80 billion) in two phases of USD 250 million each,” Kiptoo announced earlier this year.
The loan was expected to be issued in two tranches, with Ksh32.5 billion in each disbursement. However, despite the initial agreement, the money is yet to be disbursed. "The bond will be utilised during the 2024/2025 Financial Year and is expected to conclude by June 2024," Kiptoo added.
Speaking after the signing of the MoU between Kenya and Japan, President William Ruto stated that the Samurai Bond would aid in strengthening ties for industrial development and green growth as well as promote Japanese companies in Kenya.
Treasury's move to unlock the multi-billion funding comes days after Treasury Cabinet Secretary John Mbadi announced the government's plan to acquire Ksh193 billion from the United Arab Emirates (UAE) to bridge the budget deficit created following the withdrawal of the Finance Bill 2024.
The loan is expected to carry an interest rate of about 8.2 per cent, however, the terms and conditions of the credit facility may change as discussions continue.
