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Treasury to keep up domestic borrowing

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Treasury Building in Nairobi. The Government remains in the market for money. FILE PHOTO | NMG

The Treasury is expected to keep up its pace of borrowing from the domestic market even as it achieves the target for the fiscal year as it looks to match maturities of Sh180 billion in the next six weeks.

Analysts at Commercial Bank of Africa (CBA) estimate that the Treasury had borrowed a net of Sh279.6 billion from the domestic market by mid this month, some Sh3.8 billion above the approved target of Sh275.8 billion.

Ideally hitting the target would see the government slowing down on acceptance of Treasury bill and bond bids, effectively giving room for the private sector to access more credit from banks.

However, with the heavy maturities to the end of the fiscal year, analysts expect that the Treasury’s recent appetite for local debt will continue.

“So far, Treasury has absorbed Sh279.6 billion from the market, Sh3.80 billion above this fiscal year’s target.  That said, the recent appetite for local debt has been underscored by the need to redeem the upcoming heavy government debt maturities to the end of this fiscal year,” said CBA in a fixed income note.

In May, maturing T-bill and bonds amounted to Sh116.8 billion and in June Sh110.1 billion.

READ: Treasury targets Sh40bn for budget in 15-year bond

In the first two weeks of this month though, a total of Sh36.6 billion was redeemed by investors, leaving a balance of Sh80.2 billion.

Further, a total of Sh32.3 billion in Treasury bond maturities is coming up this week, in addition to T-bill maturities of Sh28 billion.

This week, the government is selling the Sh40 billion in a 15-year bond, a significant portion of the proceeds likely to go towards rolling over the maturing bond.

This is in addition to the usual T-bill auctions, which have a weekly target of Sh24 billion.

As a result of these maturities, it is likely that the overall outstanding stock of domestic debt could contract going into the new fiscal year in July.

At the end of last week, gross domestic debt stood at Sh2.403 trillion, having fallen from Sh2.415 trillion the previous week—largely on account of a reduction in the overdraft at CBK from Sh44 billion to Sh23.8 billion.

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