Paying Eurobonds with CBK Reserves

Paying Eurobonds with CBK Reserves

Paying Eurobonds with CBK Reserves

Njuguna Ndung’u, the Treasury Cabinet Secretary, made a suggestion that the  Eurobond Debt might be settled using Central Bank Reserves (CBK). The CS claimed in an interview that most low-income nations were also going through a financial problem and that Kenya was not  an exception.

In a letter, JP Morgan claimed that Kenya was “walking a tightrope” when it came to debt, to which the CS was responding.Given the current economic restrictions around the world, all low- and middle-income countries are treading carefully. The Eurobond 2024 is the reason why the Kenyan situation is being highlighted, Ndung’u said.

The looming Eurobond maturity shouldn’t cause too much concern because Kenya can settle the obligation with its central bank reserves.Since it will mature in June 2024, the Ksh295.8 billion ($2 billion) Eurobond debt has been a source of controversy, with critics who share JP’s concerns raising doubts about the government’s ability to pay it off.

JP claims that Kenya’s poor credit ratings have prevented it from accessing capital markets, preventing it from borrowing money to pay down its debt.National reserves will also suffer greatly from the massive payment gaps anticipated in 2023 and 2024; according to predictions, if no new revenue sources are proposed, the reserves will have been depleted to Ksh4.9 billion by 2024.

According to JP analysts, this sum is insufficient to buy basic imports for three months, which is a serious indicator of Kenya’s financial crisis.In an effort to help Kenya emerge from its financial crisis, the International Monetary Fund (IMF) approved a Ksh147.8 billion ($1 billion) loan to Kenya.

Despite this infusion of cash, it is anticipated that fiscal and current account deficits will stay between 5 and 6 percent throughout the following year.To the dismay of Kenyans who are already struggling, the government has introduced and increased a number of taxes in response to this dangerous situation.As things stand, it is unclear whether the Treasury Chief Secretary will follow through on his predictions by June 2024 and, if so, what impact it may have on the economy.

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