Kenya plans to access a $1.5 billion loan from Abu Dhabi in phases to ensure compliance with borrowing limits set by the International Monetary Fund (IMF), according to sources familiar with the discussions.
The initial tranche, amounting to approximately $700 million, is expected at the start of 2025, with the remaining funds to be disbursed later. The timeline for subsequent disbursements remains flexible, as discussions are ongoing.
The phased approach aligns with Kenya’s commitment under a $3.62 billion IMF program established nearly four years ago to ensure debt sustainability.
“Kenyan authorities will consider the UAE transaction as and when cash flow demands arise,” said Treasury Principal Secretary Chris Kiptoo.
Strategic UAE Financing in Africa
The seven-year budget-financing loan from Abu Dhabi adds to the UAE’s growing financial influence in Africa. Earlier this year, the UAE announced a $35 billion investment deal with Egypt. Such transactions are part of the Emirates’ broader strategy to expand its influence on the continent and counterbalance global powers like the US, China, and Russia.
Calls to the Abu Dhabi Fund for Development and emails to Abu Dhabi’s media office seeking further details went unanswered.
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The IMF has raised concerns about the loan’s potential exposure to foreign exchange risks and its size, which exceeds Kenya’s commercial borrowing ceiling of 168.8 billion shillings ($1.3 billion) for the current fiscal year. Treasury Secretary John Mbadi acknowledged these reservations during recent discussions.
IMF spokeswoman Julie Kozack urged Kenyan authorities to carefully assess the loan’s implications on fiscal and debt targets, as the nation prepares for its final program review before the IMF arrangement expires in March 2025. If approved, Kenya could unlock an additional $850 million under the program.
Mounting Fiscal Challenges
Kenya faces increasing pressure to address a $2.7 billion budget shortfall after anti-government protests earlier this year forced the Treasury to abandon revenue-raising measures. The government plans to revive some of these tax proposals to manage its deficit, now estimated at 4.3% of GDP, up from the 3.3% target set in June.
To cover its financing needs, Kenya has budgeted $2.8 billion in foreign borrowing, including commercial loans, and $3.2 billion from domestic investors for the current fiscal year.
As Kenya navigates these fiscal challenges, the phased drawdown of the UAE loan underscores its careful balancing act between immediate financial needs and long-term debt sustainability.
