Treasury bills were undersubscribed last week with investors offering Sh3.7 billion against a target of Sh4 billion. The Treasury accepted 71 per cent of the bids, rejecting the rest despite the under-subscription.
The National Treasury has paid back part of the quick-disbursing loan from the Central Bank of Kenya (CBK) following new cash from China, bringing the short-term facility to the lowest level in over a year.
Treasury secretary Henry Rotich repaid the CBK Sh30.5 billion last week reducing the Treasury’s overdraft to Sh13.6 billion down from Sh44.2 billion. The facility is given to the Treasury when it needs cash quickly such as for the settlement of salaries to public servants.
Mr Rotich had three weeks ago said he had reduced the overdraft but the CBK reflected the payment only last week.
“The overdraft figure should be lower than that; we reduced it in the first week of the year,” Mr Rotich had told the Business Daily in an earlier interview in which he disclosed the receipt of a Sh60-billion Chinese loan.
The country’s total debt position dropped by Sh43 billion relying largely on the cut in overdraft position.
The value of outstanding Treasury bills dropped by Sh13 billion after the exchequer accepted less debt than maturities.
The Treasury repaid bills worth Sh12.6 billion while only taking in Sh2.6 billion in new debt as interest rates continued to rise.
Keep interest rates low
Return for the indicative 91-day Treasury bill rose to 8.3 per cent from 7.9 per cent the previous week and seven per cent at the beginning of the new financial year. The 182-day note rose to 10.5 per cent last week from 10.2 per cent while the one-year paper gained 0.4 percentage points to 11.4 per cent. In an effort to keep interest rates low, the Treasury has been rejecting expensive bids resulting in lower debt levels.
Treasury bills were undersubscribed last week with investors offering Sh3.7 billion against a target of Sh4 billion. The Treasury accepted 71 per cent of the bids, rejecting the rest despite the under-subscription.
Mr Rotich has kept overdraft borrowing at the CBK above the Sh20 billion mark over the last 12 months signalling increased reliance on the short-term funding.
He crossed to the new financial year in July while holding an overdrawn amount of Sh44.2 billion, higher than the Sh34 billion borrowed through the facility in July last year raising questions as to whether he was servicing the short-term debt as required by law.
The overdraft facility is repayable within 12 months from the date of borrowing.
The Treasury is required to pay an interest on the overdraft equivalent to the prevailing Central Bank Rate, currently set at 10.5 per cent.
As at end of last August, the Treasury had paid out Sh693 million as interest for the overdraft from the CBK against a budgeted Sh554 million. This means the exchequer had surpassed the overdraft interest budget by Sh139 million over a two- month period.
To meet its ever-ballooning budget programmes, the Treasury has increasingly been relying on debt following failure by the taxman to meet the ambitious revenue targets set by the government.
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