Economy

State converts Sh100bn T-Bills on cash pressure

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Central Bank of Kenya. FILE PHOTO | NMG

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Summary

  • The government has converted treasury bills worth Sh100 billion into longer maturing bonds as cash crunch triggered by the effects of Covid-19 continue to squeeze public coffers.
  • Haron Sirima, the director-general for public debt management at the Treasury said the decision has helped unlock liquidity.

The government has converted treasury bills worth Sh100 billion into longer maturing bonds as cash crunch triggered by the effects of Covid-19 continue to squeeze public coffers.

Haron Sirima, the director-general for public debt management at the Treasury said the decision has helped unlock liquidity.

“We used proceeds of Treasury bonds amounting to Sh100 billion to retire the equivalent maturities in Treasury Bills,” he said. “This is a liability management operation to lengthen maturity structure of domestic debt to lower settlement and refinancing risks and improve debt carrying capacity.”

While T-Bills have maturities of up to one year, longer-term government bonds give the State room to juggle its financial obligations before paying back investors the principal sums and interest when they mature. This came at a time when debt servicing costs in January and February had hit Sh224.8 billion, eating up an equivalent of 96.64 percent of the Sh232.59 billion taxes that the Kenya Revenue Authority (KRA) collected in the period.

Expenditure on debt repayments, however, fell to Sh69.8 billion — or 46.73 percent of the tax receipts— in March after approval of the proposal to raise domestic debt roll-overs to Sh361.96 billion from Sh261.96 billion.