State eyes more Eurobonds to ease Sh10tr debt

The Kenya Kwanza government is considering issuing Eurobonds to manage and ease its maturing debt burden, according to newly published Budget documents.

The National Treasury is also eyeing a return of the M-Akiba bond, an mobile retail bond aimed at promoting financial inclusion and encouraging a savings culture.

The draft Budget Policy Statement, part of the government’s economic blueprint for the 2025/2026 fiscal year, says the mobile-phone product launched seven years ago would be revamped to ensure greater access to government securities for retail investors, particularly in the informal sector. 

The draf outlines plans to diversify funding sources, including exploring international capital markets while prioritising debt sustainability.

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Between now and next year, the country is expected to repay over Sh1.5 trillion ($11.58 billion) to foreign creditors, says the Treasury, headed by Cabinet Secretary John Mbadi. 

“Despite the disruptions to global supply chains and finance that has led to tightening and increased cost of external commercial financing, the Government will continue monitoring the macro environment conditions before accessing the international capital market through issuance of sovereign bonds and liability management operations,” says the draft published on Wednesday evening.

Last year, Kenya tapped the international bond market to raise cash and buy back a 10-year Eurobond of $2 billion that matured in June last year. The $1.5 billion bond, which will mature in 2031, was oversubscribed four times.

In addition to Eurobonds, Kenya says it may explore other financing options, including green and climate change financing, should economic conditions improve. 

The government is also looking to tap into new markets with the potential issuance of Panda (Chinese) and Samurai (Japanese) bonds, as part of its strategy to diversify funding instruments and address deficits.

Kenya joined the Asian Infrastructure Investment Bank (AIIB) last year, a prerequisite for Panda issuance. A Samurai bond is a yen-denominated bond issued in Tokyo by a non-Japanese company.

During a visit to Tokyo last year, President William Ruto said his administration would issue a Sh40 billion Samurai bond to finance energy and infrastructure projects.

The government aims to maximise loans on concessional terms, but will limit non-concessional and commercial external borrowing to projects aligned with its development agenda that cannot secure concessional financing. 

ll continue to mobilise resources from both domestic and external sources to meet its borrowing requirements,” said the National Treasury.

The external sources will be from multilateral, bilateral and commercial lenders while from domestic sources, resources will be from Treasury bonds and bills. 

“While focus will be to maximize loans on concessional terms, non-concessional and commercial external borrowing will be limited to projects that cannot secure concessional financing and are in line with the Government development agenda,” said the Treasury.