Kenya is on the verge of finalizing a $1.5 billion loan agreement with the UAE government, aimed at bolstering the nation’s financial stability amid escalating debt concerns.
The cash-strapped East African country is currently negotiating a credit deal with the UAE to bridge its budget deficit, according to a Bloomberg report on Wednesday, citing individuals familiar with the discussions.
As per a Reuters source, the agreement is nearly finalized, with Kenya expected to secure the funds at an interest rate of 8.2%.
One insider stated, “The deal is as good as done.”
Kenya has been grappling with high domestic debt costs, widespread social unrest, and increased political instability due to proposed tax hikes and calls for economic reforms.
In August, Fitch projected that the nation’s budget deficit would rise to 4.7% of GDP by the fiscal year ending June 2025, surpassing the government’s revised deficit estimates.
The ratings agency attributed the widening deficit to the shelving of planned revenue-boosting measures, heightened debt servicing costs, and rising social expenditures driven by public pressure.
Kenya’s government debt-to-GDP ratio surged to approximately 72% in 2023, up from 67% the previous year, partly due to the depreciation of the Kenyan shilling.
The ratio is expected to decline modestly to 65.6% by 2026, with external debt payments projected to drop to $4.4 billion in FY25, down from $5.4 billion in FY24.
Kenya and the UAE have been strengthening ties in recent years. Last year, Kenya extended an oil supply agreement, bypassing the traditional open tender system, allowing local firms such as Saudi Aramco, Abu Dhabi National Oil Company (ADNOC), and Emirates National Oil Company (ENOC) to supply oil on extended credit terms.
Earlier this year, Kenya and the UAE signed a memorandum of understanding (MoU) to enhance institutional capacities and governance between the two nations.