The government has borrowed Ksh193.5 billion ($1.5 billion) in a move concurrent with a plan to buy back up to Ksh116.1 billion ($900 million) worth of old debt.
According to the National Treasury, the move is part of the government’s strategy to manage its debt and extend repayment timelines.
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The new bond is set to mature in 2036 with a 9.5% interest rate. At the same time, the government is buying back the existing debt that was set to mature in 2027 with a 7% interest rate.
The buyback offer will allow investors holding the 2027 bonds to sell them back to the government at an agreed price, helping Kenya reduce the amount it needs to repay in 2027.
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At the same time, the government will be able to extend its repayment obligations by replacing the old debt with the new 2036 bond. The government will also have the flexibility to adjust how much of the old debt it buys back, therefore reducing the short-term financial pressure.
Also Read: Kenya’s Plan to Buy Back Ksh 117B Eurobond & Inside the Debt Feud Between KPLC & Nairobi County
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Investors Selling Back their Bonds to Govt
Investors who hold the 2027 bonds now have the option to sell them back to the government for a set price.
The government is offering a purchase price of Ksh129,322.50 ($1,002.50) for every Ksh129,000 ($1,000) in bonds, making it slightly profitable for bondholders.
However, investors must decide whether to take the buyback offer or keep their bonds until maturity. If they accept the offer, they will be paid immediately. If they hold on, they will continue earning interest but must wait until 2027 for full repayment.
While the move helps ease immediate financial pressure, it also means Kenya is taking on more debt in the long run.
The new 2036 bond has a higher interest rate (9.5%) compared to the 7% rate on the 2027 bonds, meaning the government will pay more in interest over time.
Also Read: Relief as John Mbadi Explains Why Govt Won’t Increase Taxes in 2025
Mbadi on 2024-2025 Budget
Treasury Cabinet Secretary (CS) John Mbadi has acknowledged that the government has been overestimating its revenue collections, forcing a downward revision of budget projections.
Speaking on the country’s financial outlook on Thursday, February 27, Mbadi said that the government had initially projected to collect Ksh2.6 trillion in ordinary revenue for the 2024-2025 financial year but has now revised this figure downwards to Ksh2.5 trillion due to lower-than-expected collections.
“2024-2025 Financial Year we had budgeted that we are going to collect ordinary revenue of Ksh2.6 trillion, we have revised that downwards to Ksh2.5 trillion, because we have realized we will not collect that money.
“We are now more realistic. We have even revised downwards the budget projection on revenue for the 2025-2026 financial year by Ksh183 billion. I have to admit that we have been living a lie. We have been overbudgeting,” he said.
He also said that the government has cut revenue projections for the 2025-2026 financial year by Ksh183 billion, reflecting a shift towards more achievable targets.
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