Eurobond payment uncertainty bad for the Kenyan economy

President Ruto

President William Ruto. 

Photo credit: File | Pool

Kenya will not pay the first instalment of its $2.0 billion (Sh309.9 billion) Eurobond loan in advance this month, as earlier planned, with the government now awaiting advice from the lead arrangers on a new date next year in the latest policy flip-flop that is sending investors mixed signals on the State of the economy.

Government officials says the earlier plan to repay $300 million (Sh46.5 billion) of the Eurobond loan now only happen on the advice from the lead arrangers. This has technically pushed back the new date to settle the first instalment of the loan to an unknown date next year.

It therefore marks a departure from the hard stop of December 31, 2023 for the buyback that had been announced by President William Ruto during the State of the Nation Address on November 9, as he sought to reassure jittered investors that Kenya was ready and capable of settling the $2.0 billion, Sh309.9 billion, Eurobond loan when it matures in June 2024.

Already, the country is battling an elevated debt crisis that soared to Sh10.59 trillion at the end of September, fueled by a depreciating currency.

And in an environment where three African countries -- Ethiopia, Zambia and Ghana have defaulted, it does not help the country if public officials make important declarations to investors that are not followed through.

Investors attach risk to uncertainty and they punish shaky economic environments with higher interest rates that lead to expensive loans. Uncertainty is also bad for attracting foreign investors who delay spending and investment until this uncertainty has been resolved.

It is time for the political class to take a step back and allow technocrats to do their work.

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