Increased use of central bank overdraft by the government in recent weeks has pushed Kenya’s domestic debt above the Sh2.2 trillion mark.
Data from the Central Bank of Kenya (CBK) shows the stock of local debt, including Treasury bills and bonds, stood at Sh2.204 trillion as at November 17 with the overdraft doubling week-on-week to reach Sh33.19 billion.
This came as the Treasury found it hard borrowing short-term in the market amidst unexpected electoral spending.
The Treasury restarted borrowing from the CBK through the overdraft window in late August after about four months of staying away.
The government is, by law allowed, to overdraw from its CBK account an amount equal to five per cent of the last audited annual revenue. The overdraft limit currently stands at Sh46.8 billion.
The facility, which attracts interest at the prevailing policy rate – now at 10 per cent, comes in handy for Treasury when it needs quick cash such as for the settlement of public sector salaries or in times of emergency.
It is usually repayable within 12 months from the date of borrowing.
The CBK has in the past warned against reliance on the facility arguing that it has the potential of causing inflationary pressure as it amounts to printing cash.
The country’s public debt, which now stands at more than Sh4.4 trillion, has been growing at a time revenue collection is falling short due to an acrimonious political environment that followed a drought earlier in the year.
KRA collected Sh40 billion less in the first four months of the 2017/18 fiscal year.