The Kenyan government is walking a fine line between recognizing its debt obligation and protecting its economic future. Last week, Moody’s Debt Service warned of Kenya’s plan to buy back almost half of the 287 billion Eurobond, warning that they would classify it as a default. As such, the Kenyan government, under the leadership of President William Ruto, has taken a soft stance on the repayment of the debt.
During the Monetary Policy Committee briefing, Central Bank of Kenya Governor Kamau Thugge stated that Kenya has the financial capacity to honor all its debt obligations before the Eurobond’s maturity date in June 2024. He added that the Treasury was exploring ways to make the payments upon maturity rather than the earlier proposed buyback plan.
Although Ruto has maintained the idea of the early buy-back plan as part of his government’s plans to tame the ballooning public debt, Moody’s warned that attempting to buy back the bonds at a below market price would risk traders and investors’ margins.
On the other hand, Ruto accused Moody’s of intimidating the country in a bid to occasion a default so that Kenya could pay hefty interest rates and fines. This led to a brief show of a standoff between the government and the investors, with neither party willing to back down.
In the end, the Kenyan government’s stance on the repayment of the Eurobond is clear; it will ensure that it does not default on the loan. It plans to use its reserves to make full payment of it by June 2024 upon the date of the loan’s maturity. Ultimately, it is the responsibility of the government to honor its debt obligations while providing a secure economic future for the people of Kenya