Kenya Initiates Talks with IMF and Other Institutions for $2 Billion Eurobond Repayment
16 October 2023
Government Announces Fuel Price Hike
In a press briefing held on Saturday, the Kenyan government announced a significant increase in fuel prices, attributing it to the ongoing global surge in oil costs.
The new prices:
petrol prices rise by Ksh. 5.72 per litre, bringing the cost of Super Petrol to Ksh. 217.36.
Diesel prices will see an increase of Ksh. 4.48 per litre, with diesel now retailing at Ksh. 205.4
Kerosene prices will climb by Ksh. 2.45 per litre, reaching Ksh. 205.06.
The Energy CS, Davis Chirchir, who led the press briefing, expressed the government's concern about the current economic challenges posed by rising fuel costs. Chirchir acknowledged the difficulties this would impose on Kenyan citizens and emphasized the need for the government to take action in response to the global surge in oil prices. He further cautioned that more price increases should be expected in the near future as the government grapples with these challenges.
ECONOMY
Kenya Initiates Talks with IMF and Other Institutions for $2 Billion Eurobond Repayment
In an effort to secure financial support for the imminent $2.0 billion (Ksh297.6 billion) Eurobond repayment due in June 2024, the Kenyan government has initiated discussions with the International Monetary Fund (IMF) and various other development financial institutions.
The decision to approach multilateral institutions comes amid challenging conditions in global financial markets, making the issuance of fresh debt for refinancing maturing obligations a formidable task. This development underscores Kenya's proactive measures to ensure the timely settlement of its impending financial commitments.
Catherine Pattillo, the Deputy Director for Africa at the IMF, confirmed that the request for additional financing and the specific amount being sought by Kenya will be a focal point during the upcoming review mission, scheduled for December.
The Kenyan government has already availed itself of $2.1 billion (Ksh312.5 billion) through its ongoing program with the IMF, which includes a substantial drawdown of $410.0 million (Ksh61.0 billion).
The IMF recently extended Kenya's program duration by 10 months, now set to conclude in April 2025. These negotiations with the IMF and other institutions signal Kenya's determination to navigate its financial responsibilities effectively amid a challenging global economic landscape.
COMPANIES
Kenyan Transport Regulator Refuses to Renew Bolt's License Over Alleged Violations
In a significant setback for the Estonian ride-hailing giant Bolt, the Kenyan National Transport and Safety Authority (NTSA) has declined to renew the company's operating license. The decision came after the NTSA received a slew of complaints, including allegations of illegal commission charges, booking fees, and violations of regulatory guidelines. Bolt had officially requested to renew its license, which was set to expire soon, as it prepared for fresh investments to expand its presence in the local market.
NTSA Deputy Director and Head of Licensing, Cosmas Ngeso, conveyed the regulator's decision in a letter addressed to Bolt's country manager, Linda Ndungu. The correspondence, seen by the Business Daily, outlined the concerns raised by drivers and their representatives, who reported various instances of non-compliance. The NTSA has made it clear that Bolt's license will not be renewed until the issues brought forward by drivers and their representatives are satisfactorily addressed and rectified. As a result, Bolt is facing the prospect of losing its transport network company operator license by the end of the month if it fails to resolve the alleged breaches.
Bolt, which had been gearing up for further investments in Kenya to expand its operations, now faces a challenging road ahead as it grapples with regulatory obstacles.
ENERGY
Kenya’s Electricity Imports Surge as Hydro Dam Production Drops
Kenya's electricity imports have seen a dramatic surge in the eight-month period ending in August, with a staggering 185 percent increase compared to the same period last year. The spike in imports was prompted by a significant decline in electricity production from the country's hydroelectric dams, largely attributed to a severe drought. According to data from Kenya Power, the nation imported 594.01 million kilowatt hours (kWh) of electricity during this period, marking a substantial increase from the 208.47 million kWh imported the previous year.
The drought, coupled with dwindling water levels in Kenya's hydroelectric reservoirs, resulted in a 21 percent drop in electricity production from the dams, totaling just 2,094 million kWh in the eight months leading up to August. Faced with these challenging conditions, the Energy Cabinet Secretary, Davies Chirchir, issued a warning about the need to explore alternative power generation sources to meet the country's growing energy demands.
A noteworthy shift in Kenya's electricity supply landscape is the prominent role that imports from neighboring Ethiopia now play. These imports, which accounted for 70 percent of the total 594.01 kWh imported, represent a substantial increase compared to 3.78 million kWh in the corresponding period the previous year, primarily due to a new import agreement that took effect in November. The situation underscores the importance of diversifying the energy mix and bolstering infrastructure resilience in the face of climate-related challenges.
TAX
Kenya Revenue Authority Intensifies Tax Enforcement with Issue of Demands
The Kenya Revenue Authority (KRA) has initiated an assertive tax enforcement campaign, issuing tax demands to businesses across the nation following an escalation of inspection visits by newly deployed enforcement teams. This swift action comes merely three weeks after KRA deployed officers with paramilitary training to ensure stringent tax compliance, in pursuit of a revenue target set at Sh2.7 trillion by the end of the current financial year.
A tax demand is an official notification to pay outstanding taxes, and the KRA's rigorous approach is already yielding results. Insiders within the organization have disclosed that the newly deployed enforcers have uncovered numerous instances of suspected tax evasion, with expectations of tax demands to continue increasing as inspection visits become more intensive.
WHAT YOU MUST HAVE MISSED
Kenya’s trade deficit shrinks by nearly double digits
Kenya's trade deficit in the first eight months of the year saw a significant reduction, shrinking by nearly double digits, primarily attributed to reduced spending on factory materials, infrastructure machinery, and fuel imports. According to provisional official data released this week, the trade deficit, representing the gap between exports and imports, decreased from approximately Sh1.12 trillion to Sh1.01 trillion, marking a 9.70 percent decline equivalent to Sh108.42 billion. This decline occurred concurrently with signs of a slowdown in the manufacturing sector's growth and a reduction in investment in large-scale public infrastructure projects by the new administration.
IMF cautions against cutting interest rates
The International Monetary Fund (IMF) cautioned against a rush to cut interest rates among African countries whose inflation has fallen in the past two months, pointing to a risk of a sharp rise in the cost of living when the rate cuts boost economic activity. Kenya is among a number of sub-Sahara economies whose headline inflation rates eased in the third quarter of the year, largely due to rate hikes and falling food prices.
Mauritian conglomerate IBL Group is on track to finalize its acquisition of a stake in Nairobi-based pharmaceuticals distributor, Harley's, by the end of this month.
Announcing the deal at the outset of the year, IBL revealed its collaboration with the French sovereign wealth fund Proparco in this investment endeavor. IBL, a prominent entity listed on the Stock Exchange of Mauritius, has been steadily increasing its investment activities in Kenya and the broader East African region since June 2022, making notable investments in companies like Naivas Supermarkets, Equator Energy, and now Harley's. This expansion strategy also saw IBL establish an office in Nairobi back in 2018, reinforcing its commitment to identifying and capitalizing on buyout opportunities within East Africa.