Kenya will wait to draw down $1.5bln UAE loan, finance minister says
Kenya will wait to draw cash from a $1.5 billion privately placed bond in the United Arab Emirates so that it can fit into its budget plans for this financial year, Finance Minister John Mbadi said on Friday.
The East African nation has struggled with a surge in debt service costs in recent years following a borrowing spree and is seeking to put its financing on a more solid footing while talks are already underway with the International Monetary Fund over a new lending programme once the current one expires in April.
"The reason why we have not done it is that we have to do it within our fiscal framework," Mbadi told Reuters, in reference to tapping cash from the UAE loan.
Kenya has also raised $1.5 billion in a new 10-year dollar bond this week to manage upcoming maturities.
By the end of June, Mbadi added, the government is expecting more than $950 million in funding from other external sources, including the World Bank, the African Development Bank, Italy and Germany.
"We are still holding out to see exactly how much budget gap we will still have from the external finances before we draw the (UAE) money," said Mbadi, speaking by phone from Nairobi.
The country's fiscal year runs from July 1 till June 30.
Kenya's move to borrow from the UAE marks a new source of funding, after China scaled back its lending to Africa and a surge in Eurobond yields hindered frontier issuers.
Kenyan President William Ruto has also moved to strengthen trade ties with the UAE since taking office in October 2022.
The UAE lending, agreed last year, has an 8.25% interest rate and will be repaid in $500 million instalments in 2032, 2034 and 2036, Mbadi said.
"We can use it partly for liability management, partly for budgetary support, or exclusively for budgetary support," he said.
The government will use $900 million of the $1.5 billion bond issued this week to buy back a 2027-maturing Eurobond, Mbadi said, and will use the balance to retire syndicated loans that are falling due later this year.
(Reporting by Duncan Miriri Editing by Gareth Jones)
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Al Etihad
5 hours ago
- Al Etihad
London stocks pull back as investors turn cautious ahead of US-China talks
9 June 2025 16:40 LONDON (REUTERS) London's benchmark index slipped on Monday after rounding off four weeks of gains, as caution prevailed ahead of much-awaited US-China talks later in the FTSE 100 was down 0.3%, while the mid-cap FTSE 250 was up 0.4%.Top officials from the US and China are scheduled to meet in London for talks that investors hope will indicate some progress in de-escalating trade tensions between the world's two biggest talks follow a phone call between the presidents of the two countries last week, in which they agreed to hold more talks amid a global trade war that has escalated from tit-for-tat tariffs to export finance minister Rachel Reeves will hold a meeting with Chinese vice premier, He Lifeng, without providing any details on the sectors were lower, with aerospace and defence stocks leading losses. They were down 0.9%, extending declines to a third session. Pharma stocks dipped 0.8%, as investors looked to book some stocks rounded off the previous week with gains, after a US jobs report allayed concerns of an economic slowdown in the world's biggest economy, despite a US tariff roller stocks, WPP slipped about 2% to bottom the FTSE 100. The ad group said its chief executive officer, Mark Read, would retire by the end of soared 70% to top the FTSE 250 after the scientific instruments maker said it has received a takeover proposal from private equity firm Advent, valuing its shares at 37.35 pounds per jumped 24% after US chipmaker Qualcomm agreed to acquire to semiconductor company for about $2.4 billion. M&G Investments gained 1.7% as UBS upgraded the stock to 'buy' from 'neutral'.
Zawya
5 hours ago
- Zawya
Saudi Arabia's first-quarter GDP grows by 3.4%, beating flash estimates
Saudi Arabia's economy grew by more than expected in the first quarter of 2025, according to government data estimates, with lower oil prices impacting the economy less than previously forecast. First-quarter GDP grew by 3.4% compared to the same quarter of the previous year, beating flash estimates of 2.7% released in May by the Saudi General Authority for Statistics. "The upward revision was both due to a smaller annual contraction from the oil sector and stronger private sector growth," said Monica Malik, chief economist at Abu Dhabi Commercial Bank. Oil GDP shrank by 0.5%, while initial flash estimates had shown it contracting by 1.4%. Non-oil growth reached 4.9% compared to estimates last month pointing to a 4.2% increase. The impact of lower oil prices may have been blunted by the kingdom's increase of oil output. The kingdom faces a widening budget deficit with the International Monetary Fund saying Riyadh needs a price of oil of over $90 per barrel to balance its books compared to prices of around $60 per barrel in recent weeks. Saudi Arabia, the world's biggest oil exporter, lowered its July prices for Asian buyers at the beginning of June, after Organization of the Petroleum Exporting Countries and allies, known as OPEC+, hiked output for a fourth month. OPEC+ agreed to another big output increase of 411,000 bpd for July, having increased output by the same amount in May and June. Saudi Arabia is in the midst of a costly economic transformation program known as Vision 2030 that aims to wean the economy off oil dependency and has been funneling billions into massive new development projects. Saudi Finance Minister Mohammed Al-Jadaan said the kingdom would "take stock" of its spending priorities in response to a significant decline in oil revenue, the Financial Times reported in May. "We also expect to see some pullback in government spending to limit the widening of the fiscal deficit, which will likely weigh on non-oil growth," said Malik. Daniel Richards, senior economist at Emirates NBD, said that still, the bank believes that spending will remain high. "There is still sufficient project spending already in progress that growth will remain supported through this year and next at least," he wrote in a note. Saudi Arabia is committed to hosting several large international events, each of which require significant spending on construction and development. These include the 2029 Asian Winter Games, set to feature artificial snow and a man-made freshwater lake, and the 2034 World Cup, for which 11 new stadiums will be built and others renovated. Saudi Arabia's 2025 fiscal deficit is forecast at around 101 billion riyals ($27 billion). (Reporting by Pesha Magid; Editing by Toby Chopra)
Zawya
5 hours ago
- Zawya
Nigeria's economic turnaround: Reforms fuel growth and investor confidence
Two years after Nigeria's economic reforms have gained traction with macroeconomic stability returning, foreign capital flowing in, and the economy on a steady trajectory to full recovery, the nation has achieved progress many thought was impossible, and more can be accomplished if the momentum is maintained, writes JOSEPH INOKOTONG. TWO years into President Bola Ahmed Tinubu's administration, Nigeria's economy, long mired in oil dependency, structural distortions, and governance challenges, is showing signs of a turnaround. Despite ongoing hardship for many Nigerians, experts and multilateral institutions agreed that macroeconomic fundamentals are stabilizing, reforms are gaining traction, and investor confidence is rising. Turning the tide with reforms Tinubu's tenure began with a bold move, the removal of the long-standing fuel subsidy, which had drained public finances. He also put an end to the Central Bank of Nigeria's (CBN) unsustainable financing of fiscal deficits, reined in monetary excesses, and unified the exchange rate. These reforms, though painful, have begun to yield results. Nigeria's economy is projected by the World Bank to grow by 3.7 per cent in 2024—its strongest performance since 2014 (excluding the post-COVID rebound). Crude oil production has risen from a low of 1 million barrels per day (bpd) to 1.5 million bpd, and the naira, though volatile, has stabilized as the gap between official and black-market rates narrowed significantly. Foreign portfolio investments surged to $3.48 billion in the first half of 2024, compared to $756.1 million in the same period of 2023. Analysts attribute this uptick to the CBN's enhanced policy transparency, reduced forex market intervention, and successful clearing of a $7 billion FX backlog. Positive global ratings and Eurobond market re-entry Fitch Ratings upgraded Nigeria's outlook to 'Positive,' citing improved fiscal discipline, a reduction in fuel subsidies, and higher oil output. Moody's followed suit, lifting Nigeria's sovereign credit rating from 'Caa1' to 'B3,' based on stronger external and fiscal positions. These upgrades reflect growing optimism that recent policy changes are sustainable. This renewed credibility allowed Nigeria to return to the international Eurobond market in late 2024, raising $2.2 billion despite subscription offers exceeding $9 billion. It marked Nigeria's re-emergence after a two-year hiatus and signals strong global investor appetite. Managing exchange rate volatility A cornerstone of Nigeria's stabilization plan has been unifying its multiple exchange rates. By adopting a market-driven naira valuation, speculative arbitrage has drastically reduced. According to Ifeanyi Ubah of Commercio Partners, though the naira depreciated from ₦1,475/$ in January 2025 to ₦1,598/$ by May, the fluctuation has been more orderly and transparent, signaling increased market confidence. The country's external reserves, despite early 2025 drawdowns, began to rebound by late April, reaching $38.9 billion by mid-May—enough to cover 7.6 months of imports. This underscores the CBN's strategic efforts to rebuild buffers amid external shocks. Oil price decline: A looming risk While oil production has improved, declining global prices pose new challenges. OPEC+ countries recently agreed to ramp up production, pushing Brent crude closer to $60 per barrel. Some projections suggest a potential drop below $50 per barrel by year-end—a troubling scenario for an economy still reliant on oil. At current prices and 1.5 mbpd output, Nigeria's fiscal revenue could fall 10% below its breakeven level. Yet, the CBN is responding proactively by enhancing non-oil exports, supporting backward integration to reduce import dependency, and simplifying diaspora remittance processes. The apex bank is also encouraging sectors like agriculture, manufacturing, and creative industries to adopt export-led strategies. Nigeria's creative economy alone has the potential to generate $25 billion annually, offering a critical FX diversification pathway. Capital market surge and Sukuk success Investor confidence is also evident in the capital markets. In 2024, Nigerian listed firms declared ₦1.1 trillion in dividends, with ₦1 trillion already paid. The Securities and Exchange Commission (SEC) reported ₦3.68 trillion in new issues for the year, ₦3.62 trillion in equities, and ₦59.82 billion in fixed income. The Debt Management Office's Series VII Sovereign Sukuk, aimed at financing infrastructure, was another highlight. It attracted ₦2.205 trillion in subscriptions, 735% over the ₦300 billion offer. These funds will be used to build roads and bridges across all six geopolitical zones and the FCT, aligning with Tinubu's infrastructure-focused Renewed Hope Agenda. Meanwhile, mergers, acquisitions, and corporate restructurings continued at a rapid pace. In 2024, the SEC approved 11 M&A deals worth ₦320.36 billion. Major transactions included N Seven's ₦103.7 billion acquisition of a controlling stake in Guinness Nigeria Plc. Inflation slows, fiscal metrics improve Inflation, though still elevated, is beginning to ease. The National Bureau of Statistics (NBS) reported a drop in headline inflation to 23.71% in April 2025 from 24.23% in March. Food inflation also declined slightly on a month-on-month basis. The Central Bank's tighter monetary stance is credited with reducing inflationary expectations. The fiscal position is also improving. The World Bank's latest Nigeria Development Update notes that the consolidated fiscal deficit fell from 5.4% of GDP in 2023 to 3.0% in 2024. Federation revenue surged from ₦16.8 trillion to ₦31.9 trillion, equivalent to 11.5% of GDP. Moody's expects Nigeria's debt-to-GDP ratio to stabilize at around 50%, with interest payments consuming about 35% of revenue—a manageable, albeit high, burden. Forward outlook: Stability with inclusive growth Although the reforms have yet to alleviate hardship for many citizens, analysts agree that they are laying the foundation for long-term recovery. The World Bank warns that maintaining momentum is crucial and calls for deeper reforms to generate jobs, reduce poverty, and ensure inclusive growth. 'Nigeria has made impressive strides to restore macroeconomic stability,' said Taimur Samad, Acting World Bank Country Director for Nigeria. 'The challenge now is to shift public resources away from unsustainable patterns and towards investing in human capital, infrastructure, and social protection.' Nigeria's economy is far from fully recovered, but the signs are encouraging. With macroeconomic stability returning, foreign capital flowing in, and global institutions offering cautious optimism, the Tinubu administration has achieved progress many thought unlikely. If reforms are deepened and sustained, Nigeria may well be on a path to lasting growth and prosperity.
