Kenya's Eurobond Debt Surpasses KSh 1 Trillion on Weak Shilling

 

Due to the significant depreciation of the Kenyan shilling since the issuance of sovereign debts or Eurobonds, Kenya is now faced with the obligation of clearing outstanding debts amounting to over KSh 1 trillion. President William Ruto assured Kenyans that he would honour debt obligations.  The sharp decline in the value of the shilling exposes the country to potential challenges in refinancing when the obligations mature. According to Business Daily, the debt trend reveals that Kenya's initial Eurobond debt at issuance was KSh 697.7 billion, but it has escalated to KSh 1.117 trillion due to the depreciation of the local currency.  The Central Bank of Kenya (CBK) forex data showed the shilling exchanged at KSh 157.3 against the US dollar on Thursday, January 4. The shilling declined by 27.36% against the dollar in the past year, down from the rate of KSh 123.55 in January 2023. How Kenya triggered positive market response Kenya successfully made a timely interest payment on its Eurobonds, triggering a positive response in the bond market. The interest payment for the $2 billion (KSh 316.4 billion) debt, issued nearly a decade ago at a rate of 6.875%, was due by December 24. According to a report by Bloomberg, the bond market responded positively, with the yield on the securities dropping 65 basis points to 13.5% by 4:18 p.m. in Nairobi. The successful interest payment set Kenya apart from its neighbour, Ethiopia, which recently failed to meet an interest payment. What did William Ruto say on debt obligations? In November 2023, President William Ruto assured that Kenya's economy was stable enough to pay off its debt. "Our main problem was the debt, and many people thought Kenya would end up like many other countries that are running into default. I want to assure Kenyans that we have stabilised our economy and we are ready and committed to pay all our debts," said Ruto. He maintained that the decisions made by the government in the past year put the country on a sound economic footing. 

by  Japhet Ruto