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State overdraft at central bank falls to 11-month low of Sh14 billion

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The Central Bank of Kenya (CBK) building in Nairobi. FILE PHOTO | NMG

The overdraft to the national government from the Central Bank of Kenya (CBK) has fallen drastically to levels last seen in August last year as the fiscal year winds up.

This came after the state reached the limits of its domestic borrowing programme that stood at Sh287.7 billion a week ago, and is on track to hit a revised limit of Sh293.7 billion with new offers for treasury bonds and bills. In the most recent offer, the government is trying to raise Sh40 billion through a bond whose sale closes today (Tuesday).

Data from the CBK show that the overdraft stood at Sh14.13 billion as at June 8, down from Sh44.35 billion as at the end of last month. This is a 68.1 per cent reduction or slightly more than Sh30 billion in absolute terms.

The fall in overdraft effectively pushed down the outstanding amount of domestic debt by Sh30.6 billion to a total of Sh2.417 trillion — which is slightly below half of the total public debt currently estimated to be about Sh5 trillion.

READ: Treasury cuts CBK overdraft by 75pc on healthy cash flow

Ordinarily, the overdraft should come close to zero by the end of the financial year, says investment bank Kestrel Capital quoting the Treasury.

“According to the Treasury, usage of the overdraft at CBK fluctuates within the financial year but reduces close to zero at the end of June,” says Kestrel.

However, it is rarely achieved.

On June 30, 2016, for example, the outstanding amount was Sh44.2 billion, close to the limit of Sh46.8 billion for that fiscal year.

The national government borrows from the CBK at the maximum of five per cent of the most recently audited gross recurrent revenues with the interest pegged to the Central Bank Rate.