Capital Markets

State domestic debt in T-Bills drops 20pc


The Treasury building in Nairobi. FILE PHOTO | NMG

Domestic government debt in form of Treasury bills has dropped to 20.7 percent of total borrowing, on the back of efforts by the State to lengthen the debt maturity profile and reduce refinancing risk.

The short-term securities accounted for Sh759.1 billion out of the government’s Sh3.6 trillion total domestic debt as at May 28, with Treasury bonds accounting for 77 percent.

At the beginning of the fiscal year in July 2020, the share of debt in form of T-bills stood at 27.9 percent, and bonds at 69.9 percent.

The National Treasury has been looking to cut refinancing risk which comes when too much public debt becomes due in a short period, thus putting pressure on tax revenue and forcing the government to roll over the maturities, often at a higher cost.

The Treasury was also asked to reduce the stock of the Treasury bills by Sh200 billion by the National Assembly in the annual budget estimates for the current fiscal year, as concerns rose on the sustainability of Kenya’s public debt.

The Central Bank of Kenya (CBK) data shows that the outstanding amount in T-bills went down by Sh128 billion to Sh759.1 billion between June 30, 2020 and May 28 this year, halting several years of steady growth in the stock of short term debt.

The reduction has largely been helped by the high demand for bond issuances in recent months, which has allowed CBK to fill the domestic borrowing needs of the government through long-term paper while leaving T-bills largely to act as liquidity management option for lenders.

CBK last year also experimented with rolling over maturing T-bills using a bond issuance, but the regulator has yet to indicate whether this will be a common occurrence going forward.