Kenya is set to draw down $865 million (Sh112.2 billion) in new loans from the World Bank and the African Development Bank (AfDB) before the end of the current fiscal year to fund the external financing component of the budget deficit.
National Treasury Cabinet Secretary John Mbadi told Parliament on Wednesday afternoon that he hopes to receive $265 million (Sh34.4 billion) from the AfDB in a week’s time, while the latest loan tranche of $600 million (Sh77.9 billion) from the World Bank is expected before the end of June.
These loans are expected to augment the borrowing from the domestic market to fill the government’s budget deficit of Sh887.2 billion for the fiscal year ending June.
The deficit is to be funded through net domestic borrowing of Sh605.7 billion and external borrowing of Sh281.5 billion, as per the revised numbers contained in the second supplementary budget of the 2024/2025 fiscal year.
The Treasury had been banking on a final drawdown of $764 million (Sh99.02 billion) from the International Monetary Fund’s medium-term programme, but the funds will not be forthcoming after it reached an agreement with the Bretton Woods institution to cancel the ninth and last review of the programme and instead opened talks on a new programme.
“The World Bank disbursement of $600 million is coming in June, now that the National Assembly and the Senate have passed the Conflict of Interest Bill. The World Bank would not give us money until it was passed,” said Mr Mbadi.
“Another loan of $265 million from the AfDB, is coming in a weeks’ time. All the conditions precedent have been realised,” he added.
The Treasury also went to the market in February this year for a $1.5 billion (Sh194.7 billion) Eurobond, but the proceeds of this loan were directed towards the refinancing of existing debt rather than budget financing.
Out of the amount, $579.6 million (Sh75.2 billion) was used to make a partial buyback on another Eurobond that was due to mature in 2027.
The balance of $880 million (Sh114.2 billion) was earmarked to refinance syndicated loans that fall due in September and October, in order to get their expensive interest rates off the government’s books.
The drawdowns from the World Bank and AfDB will also help the Treasury plug its external funding gap amid silence on whether the government will be making any drawdown on a planned, UAE-backed $1.5 billion bond before the end of the fiscal year in just over two months’ time.
On the domestic end, the Treasury remains on pace to hit the new target of Sh605.7 billion, despite the sharp increase from the original Sh263.2 billion in the June 2024 budget statement, and the subsequent revised amount of Sh413.1 billion in the first supplementary budget that was passed in November.
By mid-March, the Central Bank of Kenya (CBK) had netted Sh653 billion from the domestic market, with the expectation that it will balance between new issuances and maturities between April and June to bring the net borrowing in line with the budgeted figure by the end of the fiscal year.
