Central bank overdraft declines to lowest level since March

The share of emergency loans taken from the Central Bank of Kenya (CBK) as part of domestic borrowing by the Treasury has fallen to the lowest level since late March, pointing to easing cash flow pressure on the back of inflows of cheaper external debt.

Latest domestic borrowing statistics show the overdraft facility at the CBK accounted for 1.59 percent of the nearly Sh3.16 trillion total domestic debt stock as of May 29, the lowest share since1.27 percent on March 27.

That is an equivalent of Sh50.15 billion, largely unchanged from Sh50.06 billion a week earlier and Sh14.29 billion lower than the recent peak of Sh64.44 billion in the post-Covid period on April 24, according to the data by the CBK.

The overdraft facility, a temporary source of cash to cater for emergencies and priority payments, is usually used by the Treasury when revenue streams such as tax receipts and debt do not flow in at a pace that matches expenditure demands. It is supposed to be fully paid by the end of June. For instance, the Treasury tapped Sh33.58 billion from the overdraft facility beginning of March through April 9 higher than Sh23.33 billion netted from Treasury bonds. Net inflows from Treasury bills — repaid between three and 12 months — dropped by Sh23.33 billion.

Tax receipts in April also dropped to Sh120.1 billion from Sh140.41 billion in the same month last year, a fall of 14.46 percent in an environment where businesses struggled with lower sales. Workers were also plagued by either stagnant pay or pay cuts, while a considerable number were laid off.

Kenya has, however, since late April gotten approvals for loans in the upwards of Sh215.24 billion from multilateral development lenders whose facilities come with low interest rates and generous payment terms.