Domestic debt uptake exceeds target

Domestic borrowing hit Sh273.7 billion in the fiscal year to June, Sh25 billion more than the Treasury mandarins would have wanted in their final revision to the budget.

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

IN SUMMARY

  • Towards the end of the fiscal year, the domestic financing was revised significantly downwards to Sh248.7 billion in what was the final revision of domestic borrowing target, having been initially set at Sh279.5 billion in the budget in June 2017 and then raised to Sh297.6 billion in the first revision done early this year.

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Domestic borrowing hit Sh273.7 billion in the fiscal year to June, Sh25 billion more than the Treasury mandarins would have wanted in their final revision to the budget.

Towards the end of the fiscal year, the domestic financing was revised significantly downwards to Sh248.7 billion in what was the final revision of domestic borrowing target, having been initially set at Sh279.5 billion in the budget in June 2017 and then raised to Sh297.6 billion in the first revision done early this year.

“By the end of June 2018, net domestic borrowing amounted to Sh273.7 billion against a target borrowing of Sh248.7 billion,” the Treasury disclosed in documents released to Parliament late last week.

The local loans to the government came from commercial banks which put Sh124.3 billion, non-bank financial institutions subscribed to Sh172.8 billion with Sh3 billion coming from foreigners. The Central Bank of Kenya repaid Sh26.3 billion to the government, thereby boosting its kitty.

The cut in domestic borrowing towards the end of the fiscal year followed pressure from the International Monetary Fund (IMF) to cut spending.

The IMF disclosed at the time that it had in fact suspended the multibillion foreign exchange insurance facility that it had given the country some two years ago. The facility is due to expire mid next month.

READ: World Bank's Sh581bn loans now surpass Chinese debt

In gross terms, domestic debt increased by Sh366.5 billion. However, there were redemptions in the course of the year, which reduced the net amount borrowed.

The borrowing during the fiscal year pushed the total or gross domestic debt to Sh2.48 trillion as at the end of June. Locally sourced debt constituted 49 per cent of the total public debt by the end of the fiscal year.

The major beneficiaries of increased borrowing in the course of the year continued to be commercial banks, pension funds, insurance companies and parastatals with their share of the total holdings at 55.1, 26.9, 6.2, and 7.3 per cent, respectively.

Other investors – including foreign investors – held a stake of 4.5 per cent of the gross domestic debt as August 10. Most of the debt was held in the form of treasury bonds.

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