The Controller of Budget (CoB) Dr Margaret Nyakang'o when she appeared before the departmental committee on Finance and National planning at the Continental House Nairobi on May 15, 2024.
Overdraft charges for the government increased by 87 percent in the year to June 2024, as cash flow challenges left Treasury tapping more emergency loans from the Central Bank of Kenya amid rising interest rates.
Between July 2023 and June 2024, it cost the State Sh9.6 billion in charges for the overdrafts it took.
This was an average monthly charge of Sh802.5 million, up from Sh429.8 million monthly average fee in the prior year, the Controller of Budget (CoB) noted.
“During FY (fiscal year) 2023/24, the total charge on the overdraft facility amounted to Sh9.63 billion, an increase of 87 percent compared to the overdraft facility charges of Sh5.16 billion in FY 2022/23.
“This increase is due to the gradual change in the CBK rate and increased use due to revenue shortfalls at the National Treasury,” CoB Margaret Nyakang’o noted. The CoB report for the 2023/24 fiscal year notes that over 56 percent of the charges were between January and June this year.
The government taps overdrafts as temporary sources of funds to finance shortfalls, mainly in debt repayments.
During the year, the Treasury faced one of the heaviest debt service burdens, spending Sh1.59 trillion. Much of the debt payments were on maturing domestic instruments and interest which cost Sh830 billion, while Sh757 billion external debts were repaid during the year.
In the whole of 2023/24 fiscal year, overdraft charges ranged between Sh589 million and Sh1 billion per month. In the previous year, the monthly charges ranged between Sh319 million and Sh582 million.
In March overdraft charges rose above Sh1 billion and four months during the year witnessed overdraft charges above Sh900 million each.
The overdraft facility is managed by the CBK, and is restricted to a maximum of five percent of the most recently audited government revenues. For the financial year 2023/24, the overdraft limit was Sh97 billion.
