Kenya has ruled out a return to the global capital markets before the close of the year, citing rising borrowing costs due to the escalating tariff tensions between major economies.
The Central Bank of Kenya (CBK) said the earliest return to the global markets with a Eurobond issuance will be in 2026 as the government adopts a cautious stance, opting to wait out the emerging tightening of global financial conditions that are pushing sovereign borrowing costs up.
The government made a surprise return to the global capital markets with a fresh Eurobond issuance in February where it raised Sh194.1 billion ($1.5 billion), having attracted bids worth Sh633.9 billion ($4.9 billion), at a coupon of 9.5 percent for a 10-year paper maturing in 2036.
The CBK now says Kenya risked being shut out of the global markets, had it delayed the February issuance.
“I think our timing was just impeccable in terms of the liability management that we did with the 2027 $900.0 million maturity. Had we waited by a month, maybe we would not have been able to do it but we did it in time and removed a lot of refinancing pressures,” CBK Governor Kamau Thugge told the Business Daily.
The global debt markets are awash with uncertainty, partly due to the impact of the sweeping trade tariff changes by US President Donald Trump.
“Recent tariff announcements have increased uncertainty and contributed to tighter, more volatile financial conditions, leading to higher borrowing costs. External debt issuance has fallen by 20.0 percent year over year in the first quarter of 2025. Markets such as Egypt have seen their external bond yields rise significantly”, the International Monetary Fund (IMF) states in its just-released Fiscal Monitor.
“A further tightening of financial conditions and heightened market volatility in the United States could have significant repercussions for economies worldwide by raising sovereign borrowing costs,” the IMF’s Fiscal Monitor adds.
Proceeds from the latest Eurobond issuance were used to finance the partial buyback of the Sh116.5 billion ($900 million) May 2027 Eurobond maturity, with the bondholders having accepted Sh74.9 billion ($579.9 million).
The balance of the proceeds was used in settling foreign currency syndicated debt obligations for the financial year 2024-25.
“We do not expect to go to the market any time soon. If anything, maybe in 2026 by which time many things could have happened and we will only be able to tell at that point based on the liquidity in the markets and the cost of capital. At this stage it is difficult to anticipate what will likely have happened at that time” Dr Thugge said.
Kenya’s external debt interest payments are expected to increase by 21.6 percent year-on-year to Sh277.9 billion in 2025/26. In the same period, external redemptions are expected to increase by 58.2 percent to Sh477 billion.
