CBK overdraft raises interest on domestic debt to Sh50bn

What you need to know:

Cumulative interest payments on domestic debt hit Sh50 billion at the end of last month, surpassing the comparative November 2012 level mainly on account of government overdrafts at the Central Bank
Central Bank data shows interest paid on domestic debt this year has been consistently below last year’s payments, mainly on account of lower interest rates and reduced State borrowing from the domestic market
The data contained in the weekly bulletin of December 6 shows that there was a jump of Sh12.3 billion in cumulative interest payments in just one week between November 22 and November 30

Cumulative interest payments on domestic debt hit Sh50 billion at the end of last month, surpassing the comparative November 2012 level mainly on account of government overdrafts at the Central Bank.

According to the Central Bank data, interest paid on domestic debt this year has been consistently below last year’s payments, mainly on account of lower interest rates and reduced State borrowing from the domestic market.

The data contained in the weekly bulletin of December 6 shows that there was a jump of Sh12.3 billion in cumulative interest payments in just one week between November 22 and November 30.

“Cumulative interest and other charges on domestic debt during the week ending November 29, 2013 amounted to Sh49.5 billion compared with Sh45.8 billion during a similar period of the Fiscal Year 2012/13,” said CBK in the bulletin.

“The cost during the period was on account of interest and other charges on Treasury bills, Treasury bonds, government overdraft at the Central Bank and the pre-1997 government overdraft amounting to Sh9.0 billion, Sh39.4 billion, Sh0.4 billion and Sh0.7 billion, respectively.”

Cumulative interest and other charges on domestic debt, which stood at Sh1.169 trillion at the end of last month, amounted to Sh37.2 billion during the week ending November 22, 2012.

Interest paid on Treasury bonds in particular saw a significant rise in the last week of November, from Sh29.9 billion to Sh39.4 billion.

This was in spite of a reduction in the gross domestic debt by Sh8.5 billion in the last week of November.

Gross government domestic debt in the meantime has increased by Sh118 trillion up to the end of November, from Sh1.051 trillion held at the end of June 2013.

This is on account of increases of Sh42.3 billion, Sh49.2 billion and Sh27.2 billion, respectively in the stocks of Treasury bills, Treasury bonds and government overdraft at the CBK.

The government has increasingly turned to the bonds market to source for funds, especially for infrastructure spending, with interest payable at between 11 and 13 per cent.

The CBK has this year had at least 11 bond sales, including the most recent five-year bond and an infrastructure bond sold in September.

The most recent bond is a two-year, Sh15 billion issue that is currently on sale, and a five-year bond that closed in November attracting bids worth Sh21.44 billion, more than double the Sh10 billion that the Treasury was seeking.