The Kenyan government will utilize part of the US$ 1.2 billion Development Policy Operations (DPO) loan, approved by the World Bank Board last week, to settle the remaining portion of the Eurobond maturing on June 24, 2024. In February, the government initiated a tender offer to buy back over US$ 1.4 billion of its US$ 2 billion Eurobond maturing in June, which means it now needs to pay about US$ 500 million by the end of this month to clear the Eurobond. The World Bank noted that the new DPO loan is also aimed at fostering more competitive and inclusive product and labor markets and enhancing climate action among other long-term measures. According to Central Bank of Kenya (CBK) Governor Kamau Thugge, using part of the loan to settle the Eurobond will not impact the Kenya Shilling, which has shown strong performance against major world currencies.
Governor Thugge emphasized that the exchange rate is determined by market forces, with recent higher foreign exchange inflows contributing to a stable exchange rate. He assured that the CBK would only intervene in the market in case of excessive volatility. The Kenya Shilling has appreciated against the US Dollar by 17 percent in 2024, driven by increased foreign exchange inflows, monetary policy measures, reforms in the foreign exchange market, and the February buyback of the June 2024 Eurobond. Additionally, the CBK’s foreign exchange reserves, currently at US$ 6,979 million (3.63 months of import cover), provide a sufficient buffer against short-term market shocks, further supporting the stability of the Kenya Shilling.
