Kenya is reportedly close to finalizing a $1.5 billion loan agreement with the United Arab Emirates, which will carry an interest rate of 8.2%. This financial support aims to address the East African nation’s pressing budgetary challenges, as indicated by a source familiar with the negotiations. The Kenyan government is actively seeking to diversify its budgetary support sources, and this deal appears to be nearly complete, although officials from both the UAE Ministry of Finance and Kenya’s Finance Ministry were not available for comment at this time.
Following the announcement of the loan talks, Kenya’s dollar bonds showed a positive response, with the 2048 maturity rising significantly in value. The country has faced financial difficulties in recent months, notably after public protests led to the withdrawal of planned tax increases amounting to approximately $2.7 billion. The situation has been further complicated by delays in anticipated funding from the International Monetary Fund, resulting in an expected widening of Kenya’s budget deficit from 3.3% to 4.3% of GDP for the current financial year.
Under President William Ruto’s administration, which began in September 2022, Kenya has sought to strengthen its ties with the UAE. This strategic partnership has included arrangements for oil supply on more favorable credit terms, departing from previous procurement methods. The UAE has a history of providing significant financial assistance to its regional partners, having previously extended a $1 billion loan to Ethiopia and engaged in major investment deals with Egypt.
