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Treasury cuts CBK overdraft by 75pc on healthy cash flow

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

The Treasury has cut its outstanding overdraft facility at the Central Bank of Kenya (CBK) by 75 per cent as healthy inflows from government securities ease cash flow worries.

Latest CBK data shows that the credit line to the Treasury stood at Sh10.08 billion by April 20, down from Sh39.65 billion at the beginning of the month.

The government makes use of the facility to plug short-term cash holes, paying interest at the prevailing Central Bank Rate (currently at 9.5 per cent).
“The overdraft at CBK dropped considerably toward the end of April from a high of Sh46 billion (in March) to Sh10.1 billion implying that government cash flows have improved,” said Kestrel Capital in its latest domestic borrowing scorecard.

“We believe in the 10 months of fiscal year 2017/18 approximately Sh1.179 trillion has been raised against maturities Sh922 billion, resulting in a new borrowing of Sh257 billion ($2.6 billion) indicating that Treasury has raised 93 per cent of their budgeted target.”

The overdraft facility is by law repayable within 12 months of the date of borrowing and is capped at five per cent of the last audited annual national revenue.

Data from the National Audit Office shows that the last audited revenue, for the 2015/2016 fiscal year, stood at Sh1.194 trillion, meaning the overdraft is currently capped at Sh59.7 billion.

International market

The recent borrowing from the international market through a Sh202 billion Eurobond has also helped the government’s cash position, especially in meeting development expenditure and repayment of maturing foreign debt.

In the domestic securities market, the government comfortably hit its target in April from Treasury bills, accepting a total of Sh128.5 billion against a target of Sh120 billion from the three tenors of the paper.

Investors largely pitched for the longer one year T-bill as opposed to the 91-day paper, indicating increased confidence in stability of interest rates.

The Treasury also raised an additional Sh23.3 billion from the month’s Sh40 billion bond sale, foregoing a tap sale in spite of the shortfall in what was a further indicator of a comfortable cash position. 

The amounts raised were also enough to cover April’s maturities of Sh113.5 billion. Maturities in May are expected to total Sh116.8 billion.