Kenya’s domestic debt has hit Sh1.6 trillion after rising by Sh85.5 billion since the beginning of February, mainly driven by a rise in the stock of Treasury bills.
Data from the Central Bank of Kenya (CBK) shows the stock of debt in form of Treasury bills has gone up since February 1 to stand at Sh437 billion, while the stock of domestic debt held in Treasury bonds is up Sh22.6 billion.
The Treasury’s overdraft at the CBK has increased by Sh4.5 billion to Sh40.13 billion over the period.
The rise in T-bill stock has mainly come through the 182-day paper, which has accepted bids of Sh64.2 billion against maturities of Sh14.2 billion since the beginning of February.
The rate of growth of the debt is however likely to slow down considering that there will be T-bill and bond redemptions worth Sh127.4 billion in the second quarter of 2016.
The pressure on government to borrow has also reduced due to the downward revision of the borrowing target in the Budget Policy Statement last month.
“New borrowing currently stands at Sh172.94 billion (March, 2016). Bearing in mind that the government needs to borrow approximately Sh180.56 billion (a sum of Sh45.14 billion every month) after taking into account the net redemptions for the remaining part of the 2015/16 fiscal year, we note that the Treasury currently has minimal pressures to borrow from the domestic market,” said Genghis Capital fixed income analyst Vinita Kotedia.
The rise in bids for the Treasury bills, according to Cytonn Investments, is due to a rush by investors to lock in higher rates as the yields on the government securities continue trending down due to high liquidity in the money markets and the revised borrowing target.
The rate on the 91-day paper is now at 8.6 per cent, while the 182 and 364 day T-bills are carrying yields of 10.5 and 12 per cent respectively as per the latest auctions.
On the bonds, the profile is likely to remain little changed this month as investors have rolled over maturities of Sh19.97 billion ( from the 10- and two-year bonds issued in 2006 and 2013 respectively) to the re-opened Sh25 billion 10-year and 15-year bonds.
The bond sale—which closed last week— attracted bids of Sh26.17 billion, with the government accepting Sh17.1 billion at 14.4 and 15 per cent for the 10- and 15-year papers respectively.
Any increase in overall debt levels in Kenya has often generated heated debate over sustainability and crowding out of the private sector from the debt market.
Ratings agency Moody’s in its latest sovereign rating on Kenya however said it does not expect the debt to gross domestic product (GDP) levels to rise above the current level as completion of infrastructure projects such as the SGR translates to a decline in related capital imports. This will allow Kenya to reduce external debt financing.
Credit: Business Daily