The government may have to churn out more funds while repaying the last Eurobond payment for a loan maturing in July 2024, owing to the weakening Shilling.
Payment for the loan is scheduled to be made in the last week of June 2024 and may cost the government more money as the Kenyan Shilling is expected to depreciate even further.
According to analysts interviewed by Bloomberg, the Kenyan Shilling is expected to drop and trade at Ksh210 against the US dollar by the end of 2024.
This slide will affect the final interest and principal amount payment on the maturing Eurobond which was borrowed in 2014.
In December 2023, the government repaid Ksh10.8 billion which was a fraction of the expected Ksh150 billion repayment.
Further, Treasury Cabinet Secretary Njuguna Ndung’u stated “The final interest payment on this Eurobond is scheduled for the last week of June 2024, alongside the repayment of the principal amount of $2 billion (about KSh312.1 billion at current exchange rates).”
Currently, the loan amount stands at Ksh325 billion given the exchange rate on Monday where the US dollar traded with the Kenyan Shilling at 162.29, a historic low.
Additionally, according to Timothy Kiarie a financial expert who spoke to Bloomberg, “The government will have to chip in more in terms of repaying that loan.”
“Given that fundamentals haven’t changed much and that the Central Bank of Kenya is still struggling with dollar reserves, a widespread panic could accelerate the loss on the Kenya Shilling,” he added.
In addition to the depreciating Shilling’s predictions in debt analysis, the country’s imports are set to suffer a blow as traders experience more challenges with high exchange rates.
This has prompted, the Shilling to be billed as the second worst-performing currency in Africa.
In December 2023, after the repayment of the loan, Treasury Cabinet Secretary Njuguna Ndung’u stated that the government was on track to repay the loan and that the timely payment was a positive sign for investors.
“The timely settlement of interest payments on the Eurobond has not only sent a positive signal to investors but has also resulted in a reduction in yields of Kenya’s Eurobonds in the global financial markets,” CS Ndung’u stated.
