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State overdraft at CBK hits Sh23bn

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

The national government overdraft at the Central Bank of Kenya (CBK) rose at the end of October to the highest level in four weeks.

The overdraft, which is an equivalent of emergency lending to the Treasury, stood at Sh23.44 billion as at October 26 compared to Sh4.33 billion in the previous week.

In the two weeks preceding October 19, the national government had incurred no credit from the CBK, according to data from the monetary authority.

The CBK lends to the central government whenever the latter has liquidity shortage, easing such urgent payment requirements such as salaries and other recurrent expenditure such as debt repayments.

The emergency lending, which is regarded as direct creation of cash by the CBK, is supposed to be restricted to a maximum of five per cent of the most recently audited revenues. It is supposed to be repaid by the end of the fiscal year.

The last time the CBK lent more cash to the Treasury than at the end of last month was on September 28 when the balance stood at Sh39.29 billion.

The Treasury tends to incur most of the CBK debt when its auctions have failed to attract adequate bids from investors. At other times, the CBK refuses to accept bids that it deems to be too expensive in terms of interest payments to investors, decreasing the amount available for the Treasury.

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