Central Bank of Kenya (CBK) Governor Kamau Thugge has disclosed plans to repurchase a quarter of Kenya's Ksh 298.1 billion Eurobond, set to mature in 2024, before the end of this year.
Speaking to Reuters during the World Bank and International Monetary Fund (IMF) meetings in Marrakech, Thugge clarified that the Ksh74.4 billion payment would follow the acquisition of new loans, a move aimed at easing concerns that Kenya would default on the loan.
According to Thugge, CBK is actively engaging with two commercial banks to secure loans ranging from Ksh74.4 billion to Ksh149 billion.
He highlighted that part of these funds would be used in the Eurobond buyback, liability management, and the remainder to support the national budget.
"We would like to start as quickly as possible," he said, stressing the urgency of the buyback plan.
Moreover, Thugge revealed ongoing discussions with the IMF to “augment” Kenya's loan programme, set for review in November.
He also spoke of negotiations with the World Bank for a Ksh111.7 billion cash injection in March 2024.
The governor expressed openness to requesting "exceptional access" from the IMF, which exceeds the typical funding limits.
"We don't mind actually asking for exceptional access," Thugge noted.
"Of course, it has additional conditions and requirements, but the kind of reforms we are undertaking we can put that on the table.”
Exceptional access would allow CBK to ask for more than its limit of IMF funding and if approved, it would be the third increase to the loan programme, which was originally set at Ksh 342.8 billion in 2021.
Thugge's eurobond repossession revelation comes a few months after the National Treasury declared that they were not keen on the repurchasing plan citing investors’ ‘strong’ confidence in government’s fiscal policy stance.
“Buy back is one of the strategies for 2024 but doubt whether investors are willing to sell before maturity of the bonds,” Treasury Director of Debt Management Haron Sirma said in June.
Treasury's statement followed President William Ruto's announcement, that same month, on the government's plan to buyback at least 50 percent of the Eurobond before the end of year.
Investors were opposed to the idea divulging that they might view a buy back as a default on the loan.
They explained that redeeming the loan at a price below par value would mean a loss for them.
“We deem a distressed exchange occurs when there are economic losses to creditors and when the transaction has the effect of allowing the issuer to avoid a likely eventual default,” Moody’s Investors Services' vice president and senior credit officer David Rogovic said.
“We need to see the details and the terms of the buyback before we can assess whether it constitutes a distressed exchange, and therefore a default.”
