Treasury prices Sh292bn Eurobond in debt strategy push

Kenya has successfully priced a USD 2.25 billion (Sh292billion) dual-tranche Eurobond, marking a major step in its ongoing efforts to restructure and smoothen the country’s external debt profile.

In a statement issued Friday, Treasury announced that the issuance was significantly oversubscribed, reflecting renewed investor confidence in the country’s economic outlook.

The bond comprises two tranches: USD 900 million (Sh117 billion) in 7.875 per cent notes due in 2034 and USD 1.35 billion (Sh175.5 billion) in 8.700 per cent notes due in 2039.

The 2034 notes will amortise in three equal instalments in 2032, 2033 and 2034, giving them a weighted average life of seven years. 

The 2039 notes will also amortise in three equal instalments in 2037, 2038 and 2039, resulting in a weighted average life of 12 years.

Announcing the successful pricing, Treasury Cabinet Secretary John Mbadi said the strong uptake signals growing confidence in Kenya’s fiscal management.

“The successful pricing of this dual-tranche Eurobond demonstrates continued investor confidence in Kenya’s economic reform agenda and our commitment to prudent public debt management,” Mbadi said.

He added that the order book significantly exceeded the offered amount, describing the demand as “strong and high-quality,” with participation from a broad base of international investors.

According to the Treasury, the proceeds will primarily be used to refinance existing public debt obligations. 

This includes a tender offer to purchase up to USD 150 million (Sh19.5 billion) of the outstanding 7.250 per cent notes due in February 2028 and up to USD 350 million (Sh45.5 billion) of the outstanding 8.000 per cent notes due in May 2032, inclusive of accrued interest.

“The proceeds of this issuance will be applied toward refinancing near-term maturities and supporting general budgetary requirements, thereby reducing refinancing risks and smoothing our external debt maturity profile,” Mbadi said.

The Treasury indicated that the results of the tender offer will be announced on February 26, 2026.

The move forms part of a broader strategy to proactively manage Kenya’s public debt liabilities and ease pressure from large bullet repayments in the coming years. 

By amortising the new notes in instalments before final maturity, the government aims to avoid sharp repayment spikes that have in the past strained foreign exchange reserves.

The successful issuance comes against the backdrop of improving sovereign credit metrics. 

The Treasury noted that Kenya recently received a ratings upgrade from Moody’s, which raised the country’s sovereign rating to B3 from Caa1 and revised the outlook to stable.

Mbadi attributed the improved sentiment to “reduced default risks, stronger foreign-exchange reserves, and a narrowing current account deficit,” adding that the government remains committed to fiscal consolidation and structural reforms.

Analysts say the bond pricing reflects a gradual restoration of confidence following a period of heightened debt distress concerns. 

The oversubscription suggests that investors are responding positively to Kenya’s efforts to manage liabilities and lengthen maturities.

The Cabinet Secretary reaffirmed that disciplined debt management remains central to the administration’s economic agenda.

“We value the continued partnership with our investors and reaffirm our commitment to prudent, transparent and effective debt management, which is a key pillar of the Bottom-Up Economic Transformation Agenda,” Mbadi said, referencing the policy framework championed by President William Ruto.

Market observers note that the success of the issuance will likely provide short-term relief on refinancing pressures while giving the government fiscal space to pursue economic recovery measures.

However, they caution that sustained fiscal discipline, revenue mobilisation and expenditure control will be critical in ensuring that Kenya’s debt remains on a sustainable path in the medium to long term.

For now, the Treasury is banking on the successful Eurobond pricing and the forthcoming tender offer to reinforce its strategy of reducing risk exposure, stabilising the debt portfolio and maintaining investor confidence in Kenya’s economic trajectory.