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Eurobond buybacks, loans lift debt service costs by Sh131bn
By the end of March, the Treasury had released Sh1.08 trillion towards payment of the public debt, leaving a balance of Sh956 billion to be cleared over three months to June.
Kenya’s public debt service cost for the year ending June has climbed by Sh131.58 billion, following the Treasury’s buyback of Eurobonds and Trade and Development Bank (TDB) loans in March.
This takes the debt service budget past the Sh2 trillion mark, as the government acts to avert debt pressure ahead. In the latest statement of revenues and exchequer issues, the Treasury raised the public debt service budget from Sh1.91 trillion to Sh2.042 trillion.
“This was to accommodate the buy-back of Eurobonds and other commercial loans like the TDB,” Treasury’s Director-General of accounting services, Bernard Ndung’u.
By the end of March, the Treasury had released Sh1.08 trillion towards payment of the public debt, leaving a balance of Sh956 billion to be cleared over three months to June.
Kenya has in recent months opted to buy back maturing debts as a way to seek some relief on expected hefty payments upon maturity.
Last month, the Treasury bought back Sh74.8 billion ($579.6 million) of the $900 million (Sh116.2 billion) 2019 Eurobond, whose full maturity was slated for June 2027.
While the government was expected to pay the first tranche of $300 million (Sh38.81 billion) of the facility in June then follow up with equal tranches in June next year and 2027, it opted to float a $1.5 billion (Sh194.10 billion) Eurobond to retire the loan.
Investors, however, sold back just 64.6 percent of the targeted $900 million (Sh116.45billion), leaving the Treasury with the larger-than-expected balance of Sh119.1 billion from the new issuance, which was then earmarked to make an early repayment of $880 million (Sh113.86billion) worth of syndicated loans due to mature in September.
The targeted syndicated loans included two facilities of $200 million (Sh25.9 billion) and €75 million (Sh10.5 billion) owed to the TDB, which the Treasury confirms to have repaid early.
In February last year, Treasury repurchased a $1.48 billion (Sh191.9 billion) portion of the $2 billion (Sh 258.79 billion) 2014 Eurobond, four months before maturity in June 2024. The buyback was financed using the proceeds of a new seven-year bond of $1.5 billion (Sh 194.10billion).
The government’s actions to repurchase maturing debts before their due dates and often by issuing cheaper bonds are meant to avert debt service pressure that has been growing in recent years, even as the stock of public debt grows.
Kenya’s public debt rose by three percent over six months to December 2024 to stand at Sh10.9 trillion, with domestic debt making up Sh5.87 trillion of the burden.
“External debt declined by 0.2 percent due to the appreciation of the Kenya Shilling against major world currencies, while domestic debt recorded 8 percent growth attributable to increased borrowing in the domestic market,” the latest Controller of Budget report shows.
