We citizens and institutions working in Kenya are shocked that the government is celebrating buying
back Eurobond with another Eurobond at a higher interest rate of 10.7% as per the statement issued
by the president on the 21st of February 2024 announcing, “Kenya’s successful settlement of a
substantial part of its 2014 $2.0 billion Eurobond” and the issuance of a new Eurobond.

The government's decision to issue a new $1.5 billion Eurobond to buy back part of the $2.0 billion
Eurobond pay-out due in June 2024 demands a critical evaluation in light of the country’s challenges
and debt management practices. This comes barely a week after another infrastructure bond was
issued without clearly indicating what it will be used for at an interest rate of 18.7%.

The President claimed that this financing strategy has reduced the overall debt by Ksh. 722 billion –
yet does not state the true cost of Kenya’s public debt stock to allow Kenyans to estimate the impact
of this reduction. This unsupported claim warrants careful scrutiny.

The economic backdrop against which this decision is made raises questions about its prudence. With
Kenya’s debt-to-GDP ratio at 70% and the country struggling to meet its revenue targets to avoid
defaulting on the current Eurobond pay-out due in June 2024, the move to issue a new Eurobond
appears to be a short-term fix to a more profound economic challenge.

Considering that the new Eurobond was issued in dollar denominated currency, the cost of servicing
this bond would likely to go up should there be further global shocks that would weaken the local
currency (shillings) – or should global interest increase via the US Federal Reserve.

Worth noting is that in 2023, the National Treasury in its attempt to buy-back of the 2014 Eurobond
was forced to cancel the plan due to investor concern of a significant proportion of the country's
limited foreign exchange reserves. It is also worth noting that the immediate liquidity demand to avoid
defaulting the $2.0 billion Eurobond forced the National Treasury to seek multiple lines of credit from
the International Monetary Fund (IMF) to shore up investor confidence at International Bond and
Capital Markets.

In the past 12-months, the IMF approved close to $1 billion of loans to Kenya through its Extended
Fund Facility, Extended Credit Facility, and Resilience and Sustainability Facility arrangements with
immediate access to $684.7 million.

While Kenya is grappling to repay its current public debt obligations, it is economically scandalous
that the IMF continues with its backed economic programs leading to Kenya issuing the most
expensive bond at over 10% in the medium term. This does not communicate economic stability.
Rather, it reflects the current state of economic despair and distress we are in as a country.

This new issuance’s higher interest rate translates to an annual interest payment obligation of $146.25
million from the $137.5 million paid on the 2014 Eurobond, translating to an increase of $8.75 million.
This would likely result in increased cost of debt servicing for the country.

The OKOA Uchumi Coalition is concerned that being a dollar-denominated bond, there are higher
chances of global economic shock awaiting in the form of increased interest rates and continuous
depreciation in local currency, thus making debt more expensive to repay.

We are also perturbed that parliament and the executive find it okay to repay a Eurobond whose
acquisition and utility have been questioned by the independent fiscal institutions. The ongoing debt
acquisition trend puts Kenya on a dangerous path to destruction, especially due to the continued
disregard for the need for debt to have intergenerational equity as per our constitution. Section 50 of
the Public Finance Act requires that the government ‘In guaranteeing and borrowing money, the
national government shall ensure that its financing needs and payment obligations are met at
the lowest possible cost in the market, which is consistent with a prudent degree of risk while
ensuring that the overall level of public debt is sustainable.’

It is also paradoxical that the government of Kenya is only concerned with the return of the private
investors in the refinancing and repayment of the bond rather than looking at the bigger picture of
the overall debt burden that is compounded by the pricing of the new Eurobond. Most importantly,
we wonder when the Public Finance Act Section 15 (2) b on fiscal responsibilities that requires
that in the medium term, all borrowing by the government be only for development initiatives
and not recurrent is applicable.

We also wonder when the law changed to allow for significant medium-term borrowing for debt servicing. The continued acquisition of debt on political and economic whims instead of legal and constitutional foundation is very concerning for a sovereign

We reiterate that we are a country that is governed by the rule of law and we expect strict
adherence to the law including public finance management and management of public debt.

The OKOA Uchumi Coalition notes that the new Eurobond has a ‘B’ rating according to Fitch and
S&P with a negative outlook due to Kenya’s external debt refinancing risks amid high external debt
service requirements. This is a warning sign that not all is well in Kenya.

Even more concerning is that suddenly, credit rating agencies and international markets that previously
warned about Kenya’s unsustainable debt have surprisingly expressed confidence in the Kenyan
economy. Yet, it is in the public domain that the sole purpose of the new $1.5 billion Eurobond is to
repay the $2.0 billion due in June 2024. We see this process as a vicious cycle of Eurobond and debt
repayment with no plan to increase economic growth.

In conclusion, the OKOA Uchumi Coalition calls on the Kenya government to look for the best
financing strategies that will not result in increased debt distress because of short-term means of financing its development goals.

The financing strategies used by the government should reflect the true face of humanity, as highlighted in the Harare Declaration's call for citizenry and people’s voices.

We call on parliament as per Article 211 of the constitution to report to the people of Kenya the
analysis conducted in the Eurobond buyback, the setting of the interest rate on the 2024 Eurobond
and the February infrastructure debt; the use of the 2 bonds floated and whether it was specifically
approved by parliament, and the plans made at ensuring servicing of the said debts optimally and in
due regard of the Kenya youth demographic dividend that does not deserve the continued debt

The undersigned Okoa Uchumi Campaign Members and Affiliated partners:
1. African Forum on Debt and Development (AFRODAD)
2. The Institute for Social Accountability (TISA)
4. Kenya Human Rights Commission (KHRC)
5. Transparency International Kenya
6. ActionAid International Kenya
7. Christian Aid Kenya
8. Inuka ni Sisi