Kenya Sees IMF Loan Agreement Amid $2 Billion Eurobond Plan

(Bloomberg) -- Kenya said it’s almost reached an agreement with the International Monetary Fund on a new standby loan facility after a meeting this week in the East Africa nation’s capital, Nairobi.

Discussion on the facility comes as Kenya is said to plan to offer $2 billion of Eurobonds in the first half of this year, according to two people familiar with the matter.

A similar facility, where the IMF availed $1.5 billion for Kenya to draw from in the event of balance of payment shocks lapsed in September. The new insurance-type facility will serve to reassure buyers of Kenyan debt.

“We are more or less in agreement on the facility,” Geoffrey Mwau, director general for budget, fiscal and economic affairs at the National Treasury, said Friday in an interview. It’s important regardless of whether the government issues foreign debt or not, and “we need to have it,” Mwau said.

The IMF’s representative in Kenya, Jan Mikkelsen, said last month that discussions on a new fund-supported program were continuing. He, like Mwau, declined to disclose the proposed size for the facility, or when an agreement might be reached.

The proposed Eurobond sale is part of the government’s plans to raise money offshore to boost infrastructure spending, and increase economic expansion to 6.1 percent from under 6 percent last year. Proceeds will refinance $750 million of debt maturing in June, and fund part of the nation’s 2018-19 budget, according to the people who asked not to be named because the planned sale is not yet public.

The government is looking for managers for the transaction, Treasury’s Mwau said. He declined to comment on the size of the planned issuance or its timing.

The government set out to borrow 299 billion shillings ($3 billion) in foreign commercial debt in the year through June, and has already contracted lenders to arrange a $1 billion syndicated loan. “Based on that, the Eurobond can only be $2 billion,” said Churchill Ogutu, a fixed-income analyst at Nairobi-based Genghis Capital.

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