The share of Treasury bills as a percentage of domestic debt has fallen to 10.99 percent as the exchequer continues to find success in lowering refinancing risks by taking up less in the short-term securities.
According to data from the Central Bank of Kenya (CBK) and the National Treasury, the securities now represent 10.99 percent of total domestic debt as of December 15, compared to 15.32 percent on December 30, 2022.
Over the same period, the share of Treasury bonds to total domestic debt has remained relatively unchanged, moving to 84.82 percent of the local debt share from 84.68 percent previously.
Other sources of domestic borrowing include the CBK overdraft to the National Treasury whose share of domestic debt stands at 1.75 percent and IMF funds on-lent to the government at 1.96 percent.
The continued fall in the share of Treasury bills to total domestic debt points to the success of the exchequer medium term debt management strategy which seeks to reduce domestic debt refinancing risks by cutting the short, dated papers.
“Accordingly, the 2023 medium term debt strategy envisaged maximization of concessional and semi concessional external debt while proposing liability management operations in the domestic and in the international capital markets. The domestic funding components will be through medium to long-term bonds as the stock of Treasury bills is reduced to lengthen the maturity structure and to reduce refinancing risk,” the National Treasury stated.
In absolute terms, the outstanding balance of Treasury bills, excluding repurchase agreements, now stands at Sh551.22 billion compared to Sh671.51 billion in December last year.
The successful switch to Treasury bonds from bills has been achieved against a high interest rate environment all year where investors have shunned issues of longer-dated papers to guard against duration risks including the prospects of missing out on higher returns.
The rising rates has seen the exchequer striving to raise funding from bonds across the year and has forced its hand in the issuance of shorter dated bonds with a bias for re-openings and tap-sales.
CBK is for instance targeting to raise Sh35 billion at the start of the New Year in January by floating a new three-year bond and a third re-opening of a five-year bond first sold in July.
The move away from Treasury bills has served to ease the cost and risk analysis of Kenya’s existing public debt portfolio.
“The overall debt portfolio re-financing risk indicator improved during the fiscal year as the stock of Treasury bills decreased and more borrowing on concessional terms in line with the debt management strategy,” the National Treasury added.
As at the end of 2022, the proportion of debt maturing in one year as a percent of total debt improved to 11.7 percent from 14.8 percent in 2021 while debt maturing in a year as a percentage of GDP improved to 8.4 percent from 10.2 percent in the same period.
Treasury bills offer returns to investors on a relatively short commitment of funds, usually with tenures of 91, 182 and 364 days and are auctioned each week.
