Kenya is raising $900 million in planned external commercial financing for its fiscal year to June from international banks, the finance ministry said in a memorandum to the International Monetary Fund.
The East African nation has found it almost impossible to raise funds from international bond markets this year due to a surge in yields. It was forced to cancel in June the planned issuance of a second Euro bond for the last financial year and is now seeking alternative sources of funding.
Due to the “protracted dislocations in international financial markets”, Kenya is tapping international banks to plug part of the budget shortfall, the ministry said in the memo seen by Reuters Thursday.
The government has so far contracted a third of the amount, the ministry said, and it is reviewing offers for the balance.
The ministry did not say which lenders are involved nor the transaction type. Finance Minister Njuguna Ndung’u did not respond to a request for comment.
The government is also leaning on cheaper funding from multilateral creditors. It has asked the World Bank for a $750 million budget support loan, Ndung’u said earlier this month.
Both sides are in talks to increase the amount to be lent under the World Bank’s Development Policy Operations programme, the Treasury said in the memo, with any additional financing going towards replacing expensive debt.
“We are also actively exploring market-based debt liability management operations to reduce roll over risks stemming from maturing external commercial debts,” the ministry said.
The external funding challenges facing Kenya, combined with increasing amounts of foreign currency denominated debt falling due, have put pressure on its foreign exchange reserves.
The IMF approved the disbursement of $447 million to Kenya this week after a review of its 38-month lending deal.