Treasury ordered to draw rules for CBK emergency borrowing


Cabinet Secretary, National Treasury & Economic Planning Njuguna Ndung'u. FILE PHOTO | DENNIS ONSONGO | NMG

The Treasury and Central Bank of Kenya (CBK) have until May 2024 to draw regulations on the use of an overdraft facility amid concerns that the State is misusing the kitty held at CBK.

The National Assembly’s Public Debt and Privatisation Committee gave the two institutions six months to develop the rules after the Controller of Budget (CoB) said there is no policy to guide how and when the Treasury should tap the emergency kitty.

The Treasury has in recent months significantly increased reliance on the kitty, breaching the Sh80 billion mark for the first time in November amid a biting cash crunch.

“The National Treasury and CBK should submit to the National Assembly, within six months, regulations to guide the sustainable use of the government overdraft facility,” the committee says in a report before the House.

CoB Margaret Nyakang’o in her latest review of the kitty flagged the Treasury on the use of the funds, saying that lack of regulations has exposed the facility to abuse and unnecessarily exposed taxpayers to high interest rates.

“However, the facility continues to be used as a long-term facility, resulting in high-interest rates. This indicates a lack of policy direction in the use of a facility that may be used to smoothen tax revenue fluctuations and minimise liquidity constraints,” Dr Nyakang’o said.

The Treasury had by November 10 used 83 percent of the Sh97 billion limit available in the current financial year ending June 2024.

The facility helps the Treasury to finance short-term needs when it faces a cash crunch, including urgent payment requirements such as salaries and other priority expenditures like debt repayments.

Section 46(3) of the CBK Act sets the limit of the overdraft facility from the bank at five percent of the gross recurrent revenue as reported in the latest audited financial statements.

The increased use of the overdraft facility highlights the cash-flow woes facing the Treasury amid missed targets on the local borrowing market and missed revenue collections by the Kenya Revenue Authority (KRA).

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