Capital Markets

State faces uphill task in local borrowing

National Treasury building in Nairobi
National Treasury building in Nairobi. FILE PHOTO | NMG 

The government will come under pressure in financing domestic borrowing target of Sh300.3 billion in 2020.

Cytonn investment chief operating officer Shiv Arora says the target will be frustrated by the government’s huge refinancing activities, directives to parastatals to move cash away from the government and repeal of interest rate cap.

“With the repeal of the interest rate cap, banks now price businesses and individuals on a credit-pricing perspective, which, therefore, means private sector is no longer competing with the government,” Mr Arova said.

He added that banks have moved capital from the domestic debt and that means less supply of funding that was there for the government to pick up.

Late last year, the Treasury ordered State agencies to surrender cash balances in their accounts with an aim of cutting borrowing costs.


He said with the large repayment for projects such as SGR means pressure on interest.