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Treasury taps most cash from CBK facility in a year

National Treasury offices in Nairobi. FILE PHOTO | NMG
National Treasury offices in Nairobi. FILE PHOTO | NMG 

The Treasury’s emergency borrowing at the Central Bank of Kenya (CBK) has risen to the highest level since mid-last year, signalling increased demand for cash amid below-target revenue generation.

Latest statistics show the government overdraft rose to Sh40.66 billion on December 1 from Sh33.88 billion a week earlier, pushing domestic debt to a new Sh2.23 trillion record.

The overdrafts’ share of gross domestic debt rose to a fresh high of 1.8 per cent as a result of consistent tapping post the August 8 General Elections.

That’s the highest level since July 1 to 15, 2016 when the value stood at Sh44.20 billion—a high level signalling cash flow struggles at the beginning of government financial year that begins in July.

“There’s a correlation (between shortfalls in revenue and trapping of overdraft) there,” chief executive of Sanlam Investments Kenya Kennedy Muriithi said on phone.


“Sometimes you will have a mismatch in how projects commence and how revenue is raised.”

Since the week ended August 11 through to December 1, the Treasury has held a weekly average of Sh23.54 billion in the overdraft at the CBK.

Prior to the second week of August, the Treasury had kept off the overdraft facility since April, tapping it only in two weeks– that ended May 5 and June 2 when it borrowed Sh2.7 billion and Sh30 million respectively.

The State is confined to borrowing five per cent of the last audited accounts following abuse of the facility during the infamous Goldenberg Scandal in the early 1990s.

At the latest levels, the Treasury has tapped nearly 3.75 per cent of Sh1.085 trillion in revenue in financial year 2014-15, the last audited accounts.

The facility attracts interest at the prevailing CBK rate, which has remained steady at 10 per cent since November 2016.

The government has struggled to meet its revenue targets since beginning of this financial year, raking in Sh405 billion in collections in four months through October.

That represented a shortfall of Sh94.60 billion against a pro-rated Sh499.82 billion target, according to analysts at Genghis Capital.

“The government is still behind its domestic borrowing target for the current fiscal year, having borrowed Sh72.1 billion, against a target of Sh181.4 billion,” analysts at Cytonn Investments wrote in this week’s market report.