Kenya Secures Ksh193 Billion Loan from UAE to Boost Budget and Foreign Reserves

By:Kariuki Monroe

Kenya is set to receive a Ksh193 billion ($1.5 billion) loan from the United Arab Emirates (UAE) by the end of next week, marking a significant move to stabilize its economy and enhance budgetary support.

The loan, carrying an 8.2% interest rate, will be disbursed in a single tranche instead of staggered payments, aligning with the International Monetary Fund’s (IMF) recommendations on debt management.

This financial boost comes at a crucial time when President William Ruto’s administration faces budgetary shortfalls, especially in the health and education sectors.

Schools have warned of possible closures due to inadequate funding, while the health sector is struggling with debts amounting to Ksh30 billion owed to private hospitals.

The UAE loan is expected to bridge these funding gaps while also strengthening Kenya’s foreign reserves as the country enters negotiations for a new IMF program, following the expiration of its current $3.6 billion agreement on April 1.

Beyond immediate financial relief, the loan underscores the deepening economic ties between Kenya and the UAE. In January 2025, both nations signed a Comprehensive Economic Partnership Agreement aimed at boosting trade and investment.

Discussions are also ongoing for UAE funding to complete Kenya’s Standard Gauge Railway, a project previously supported by China.

However, financial experts have cautioned against overreliance on external borrowing, particularly dollar-denominated loans, warning of potential debt risks.

The Kenyan government now faces the challenge of ensuring prudent allocation of these funds while maintaining a sustainable debt strategy to avoid long-term economic strain.