Kenyans are set to bear an additional Sh7.3 billion cost following the government’s latest Eurobond buyback and refinancing transaction, further intensifying pressure on taxpayers amid rising debt servicing obligations.
According to details from the Treasury, the Sh7.3 billion represents incentives offered to investors in the form of price discounts on newly issued bonds and premiums paid to holders of older debt to encourage early repayment.
The government raised $2.25 billion (Sh290.3 billion) through two new Eurobonds — a seven-year note worth $900 million at 7.875 percent interest and a 12-year bond valued at $1.35 billion at 8.7 percent. However, to settle at those interest rates, Kenya sold the bonds at discounted prices, resulting in a revenue shortfall of approximately Sh4.16 billion.
At the same time, the State offered premiums to investors holding $500 million (Sh64.5 billion) worth of bonds maturing in 2028 and 2032, translating into an additional Sh3.2 billion payout to facilitate early retirement of the debt
Economist Churchill Ogutu of IC Group (Mauritius) defended the pricing structure, noting that such incentives are standard in sovereign debt markets.
“It is common practice for countries issuing new bonds and buybacks to offer these discounts and premiums on the price,” said Mr Ogutu.
He added: “In the sovereign bond market, investors come to the table with their preferred yield, with the seller having to adjust their prices via discounts if they want to settle at a lower coupon.”
The refinancing is part of the government’s broader strategy to smooth out debt maturities and avoid a repeat of the 2024 market turmoil, when concerns over Kenya’s ability to repay a $2 billion Eurobond triggered sharp currency depreciation and investor anxiety.
Treasury officials have argued that pushing repayments further into the mid-2030s — a period with fewer maturities — will stabilise Kenya’s debt profile. However, critics note that the immediate cost of refinancing adds to an already heavy debt servicing bill that continues to consume a large share of government revenue.
Beyond the Sh7.3 billion in discounts and premiums, the transaction also involves fees payable to international financial institutions that arranged the deal, including Citigroup Global Markets Limited and Standard Bank.
For many Kenyans already grappling with high taxes and rising living costs, the additional debt management expense underscores the growing strain of public borrowing.
As the buyback closes on February 26, attention now shifts to whether the restructuring will provide long-term relief — or merely postpone financial pressure while increasing the cumulative cost to taxpayers.
