Kenya is in talks with Citigroup over a proposed Sh129.7 billion debt refinancing transaction, as the government seeks to replace some of its more expensive borrowing with cheaper financing and ease pressure on public finances.
The proposed transaction is expected to involve an existing Eurobond and forms part of Kenya’s broader efforts to manage its debt portfolio, reduce refinancing risks and contain the cost of servicing public debt. The deal had previously stalled before being revived.
At its core, the arrangement would involve replacing a relatively costly debt obligation with financing secured on more favourable terms. If completed, the difference in financing costs could create savings for the government.
Those savings are expected to support food-security programmes, although it remains unclear whether the Citigroup transaction is directly linked to the separate debt-for-food arrangement Kenya has been pursuing with international partners.
Managing the cost of Kenya’s debt
The refinancing discussions come as Kenya faces substantial debt-service obligations.
The government is projected to spend about Sh2.31 trillion on debt servicing and repayments during the 2026/27 financial year, increasing the pressure on revenues and limiting the amount of money available for other government priorities.
Debt refinancing has consequently become an increasingly important part of Treasury’s strategy.
Rather than simply borrowing more money to meet every maturity, the government is looking at ways to restructure existing obligations, extend repayment periods and secure financing at lower costs where market conditions allow.
The proposed Sh129.7 billion transaction is expected to sit within a wider Sh700 billion external financing programme for the financial year ending June 2027. The programme includes potential financing through a Panda bond, Sukuk and Eurobond.
The food-security connection
Kenya has been exploring debt-for-development and debt-for-food arrangements as alternative ways of creating fiscal space.
Under a debt-for-food structure, savings generated by replacing expensive debt with cheaper financing can be directed towards programmes such as agricultural development, food production and nutrition.
Kenya has previously announced a separate $1 billion debt-for-food security arrangement involving the US International Development Finance Corporation, under which lower-cost financing would replace more expensive commercial debt, with savings directed towards food-security initiatives.
The government has also identified food security as an important priority amid concerns over agricultural production and weather-related disruptions.
A balancing act for Treasury
For Kenya, cheaper refinancing could provide some relief by reducing the amount of government revenue required to service existing obligations.
But refinancing does not eliminate the underlying debt. It changes the terms under which the debt is held.
The effectiveness of the strategy will therefore depend on the final interest rate, maturity structure, fees and other conditions attached to any new financing.
The proposed transaction nevertheless reflects a broader shift in Kenya’s debt-management strategy—from simply raising new funds towards actively managing the composition and cost of existing debt.
For a government facing large maturities and high debt-service costs, even a reduction in financing costs can create additional fiscal room.
The immediate next step will be negotiations over the structure and terms of the proposed transaction. Neither the Treasury nor Citigroup had publicly confirmed the final terms of the deal at the time of reporting.
