Treasury gets Sh2.5bn dividend from Central Bank

• CBK declared the dividend despite recording a net loss of Sh13.6 billion mainly attributed to a foreign currency revaluation loss of Sh28.2 billion this year, following the appreciation of the shilling.
• The Treasury has been looking up to the regulatory agents and other state corporations to finance it to the tune of Sh8 billion as part of efforts to bridge the Sh40 billion Budget gap created by the award of salary increments to civil servants and the military incursion in Somalia.

The Central Bank of Kenya Wednesday announced that it will pay the Treasury a Sh2.5 billion dividend, boosting the government’s cash position as it seeks to plug a widening budget deficit.

The banking sector regulator declared the dividend despite recording a net loss of Sh13.6 billion mainly attributed to a foreign currency revaluation loss of Sh28.2 billion this year, following the appreciation of the shilling.

CBK’s operating income closed the financial year with a surplus of Sh7.07 billion compared to Sh622 million the previous year driven by high interest income from increased lending to the government and commercial banks.

“On account of the improved net operating surplus, the board recommended a dividend of Sh2.5 billion to be paid to the Treasury compared with nil in the year to June 2011,” the CBK said in its annual report.

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The Treasury has been looking up to the regulatory agents and other state corporations to finance it to the tune of Sh8 billion as part of efforts to bridge the Sh40 billion Budget gap created by the award of salary increments to civil servants and the military incursion in Somalia.

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“I will be instructing all public entities to surrender excess surplus upon completion of auditing. I expect to raise additional Sh8 billion from this measure,” said Njeru Githae, the Finance minister.

Other regulators that the minister is expecting to help bridge the gap include the Capital Markets Authority and the Retirement Benefit Authority.

The request has, however, come under criticism for placing profit at the centre of the regulators’ operations instead of being the neutral arbitrator they are meant to be.

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“As regulators their main role is to ensure that the rules in play do not burden either the consumer or the players,” said Joseph Kieyah, a principal analyst at the Kenya Institute for Public Policy Research and Analysis (KIPPRA).

Prof Kieyah, however, acknowledged that the payout of dividends by regulators is an indication of improved efficiency that should be encouraged.

Last year the Capital Markets Authority paid a Sh63.8 million dividend to the Treasury and is expected to perform better this year helped by high level of activity in the equities market.

CBK has reported a Sh521 million interest income from banks that used the short term window, commonly referred to as overnight lending, and Sh1.4 billion from inverse repurchase orders, which is collateral-backed lending to banks.