The share of Treasury bills in domestic debt has shrunk to the lowest level in history on continued debt management by the government.
Data published by the Central Bank of Kenya reveals the outstanding stock of T-bills shrunk to Sh553.3 billion at the end of last week representing 10.6 percent of total domestic debt.
Proportion of T-bills in internal debt has fallen over the years from a high of 70 percent in February 2001 to the current low and is expected to even go lower.
The fall is because of the government’s aggressive aim in debt management by reducing short-term lending to push maturities to a longer period.
“The strategy aims at gradually reducing the stock of Treasury bills to manage refinancing risk and issuing medium-long term Treasury bonds,” said Treasury in an earlier report.
On the other hand, the share of bonds in domestic debt has grown to all time high of 85 percent with an outstanding value of Sh4.44 trillion by the mid of February.
Unlike bonds, Treasury bills are largely used by treasury to manage liquidity and financial markets and the broad economy while bonds are mainly used for budgetary support.
With government revenue underperforming relative to expenditure in an environment where credit has become scarce, the return on the one-year T-bill has risen to 16.9 percent.
Earnings offered by the 364-day paper is the highest since October 2015 when the rate was 21.6 percent a ripple effect of the collapse of Imperial bank.
Bonds have also witnessed a soaring in coupon rates driven by the government’s need for cash.
Other instruments of domestic borrowing include the overdraft facility at the Central Bank that stood at Sh87.5 billion (two percent of domestic debt).
The facility that allows the government to get credit up to the equivalent of five percent of ordinary revenue in its latest audited accounts. Interest charged on the facility is priced at the CBK benchmark rate.
