Kenya is poised to meet the challenge of repaying its $2 billion international bond due in June, a move expected to catalyze a rebound for the struggling shilling, according to the country's central bank governor.
With mounting concerns over Kenya's escalating debt, plummeting currency, and uncertainties surrounding its access to global financial markets, all eyes are on how the nation navigates this crucial bond repayment.
Addressing the press, central bank governor Kamau Thugge assured that inflows from the World Bank, alongside support from other multilateral institutions and regional banks, would be more than adequate to honor the bond obligations.
"The looming risk associated with the Eurobond will soon dissipate, paving the way for a robust resurgence of the shilling," Thugge remarked, following the central bank's decision to raise its benchmark lending rate for the second consecutive meeting.
Having witnessed the shilling's depreciation by over 20% against the U.S. dollar last year, Thugge believes the current exchange rate surpasses its equilibrium level. He hinted at potential central bank interventions to stabilize the currency, albeit emphasizing the institution's stance on minimizing volatility rather than targeting specific exchange rates.
Thugge also highlighted the potential for the shilling to benefit from foreign inflows and higher interest rates in the coming period.
Amidst these financial dynamics, Kenya has already received disbursements exceeding $1 billion in recent months, with an additional $1.5 billion expected from the World Bank by May. Furthermore, the economy is projected to expand by 5.7% this year, surpassing last year's growth rate of 5.6%.
Despite the optimistic outlook, the central bank had earlier forecasted a slightly higher growth rate of 5.9% for 2024 in December, reflecting the ongoing complexities and uncertainties in the global economic landscape.