Market News

Domestic debt jumps Sh36bn in two weeks on repeat poll budget


National Treasury secretary Henry Rotich. FILE PHOTO | NMG

Domestic debt rose Sh36 billion in the first two weeks of September, highlighting an increased appetite for funds by the government as it looks to cover emerging budget items such as the repeat presidential poll.

Latest data from the Central Bank of Kenya (CBK) shows that the stock of domestic debt stood at Sh2.154 trillion on September 15, up from Sh2.118 trillion at the beginning of the month.

The new borrowing was largely on the Treasury bond account, where the outstanding stock rose by Sh31.3 billion to Sh1.37 trillion in the two week period.

The outstanding stock of Treasury bills also rose, by Sh6.3 billion to Sh727.9 billion.

READ: Shilling headed for further decline, economist warns

Go higher

The stock of debt is likely to go higher in coming weeks, given that the Treasury is already behind its domestic borrowing target and maturities on Treasuries will be lower in October compared to recent monthly averages.

“The government is behind its domestic borrowing target for the current fiscal year, having borrowed Sh32.7 billion, against a target of Sh73.3 billion—assuming a pro-rated borrowing target throughout the financial year of Sh317.7 billion budgeted for the full financial year,” said Cytonn Investments analysts in a weekly markets note.

Last week, the Cabinet settled on a Sh10 billion allocation to the Independent Electoral and Boundaries Commission (IEBC) to fund the repeat poll, even though the body had requested Sh12 billion while the Treasury had estimated that it would take up to Sh15 billion to finance the exercise.

The supplementary budget requirement has raised the need to borrow more given that the government’s revenue collection for the year starting July is behind target by Sh29 billion, according to the Treasury.

The revenue target is Sh1.54 trillion for the fiscal year.

READ: Election to determine debt rating outlook

Budget deficit

The Treasury has also responded by attempting some fiscal consolidation measures, including a cut on non-essential expenditures like travel, motoring, entertainment and furniture expenses to fund the poll.

The Treasury has in the past one month also resumed its uptake of the overdraft facility at CBK in a bid to cover some of the budget deficit.
The facility had gone largely unutilised between the end of April and beginning of August, when spending slowed down ahead of the polls.

The outstanding overdraft amount on September 15 stood at Sh19.8 billion, slightly lower than the Sh21.2 billion at the beginning of the month.