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The country's domestic debt stands at 15 billion USD

21 July 2014, 18:46

Nairobi - The country's internal debt has hit 15 billion U.S. dollars following a rise in government borrowing, according to the Central Bank of Kenya (CBK).

The debt has jumped by nearly a billion dollars since March, as government aggressively reaches out to the public through the sale of Treasury bills and bonds to finance its activities.

The value of Treasury bond has hit 10.5 billion dollars while Treasury bills stand at 3.5 billion dollars.

The rest of the debt is in form of clearing items in transit, advances from commercial banks, Pre-1997 Government Overdraft and Tax Reserve Certificates, the CBK's bulletin showed.

In March, the domestic debt stood at 14.1 billion dollars. The debt has increased by more than 3 billion dollars since the beginning of the year following intense borrowing by government.

CBK and Treasury attribute the rise to the increase in Treasury bills and bonds. Between May and July for instance, the value of the two government securities has increased by 845 million dollars.

Of Treasury bills and bonds, it is the value of the latter that has increased significantly during the period, growing by 460 million dollars in the two months.

The long-term securities the government sold include a five- year and 20-year fixed bonds.

Kenya has intensified domestic borrowing in the past weeks despite successfully raising two billion dollars from sovereign bond sold to investors in Europe and U.S.

The sale of the bond, according to analysts, was to make government cut down its appetite for Treasury bills and bonds to lower interest rates in the East African nation.

Analysts noted government domestic borrowing has not dropped because of high demand for funds to cater for projects in the security, transport, education and health sectors.

Treasury Cabinet Secretary Henry Rotich has, however, assured that domestic borrowing will drop significantly as government eyes more international bonds.

"We are exploring new ways to borrow from the international market. We are currently looking at the Diaspora, Samurai and Sukuk bonds. Definitely we are going to cut our domestic borrowing this financial year," said Rotich.

Money raised from the bond, according to the official, will be used to fund infrastructure projects as well as pay off 600 million dollars loan acquired from several international banks including City Bank and Standard Chartered.

Kenya's domestic debt surged beyond the midyear target, according to CBK and Treasury. Treasury's Medium Term Debt Management Strategy released in April had projected that the domestic debt would stand at 14.2 billion dollars by the end of June, which was about 30 percent of GDP.

The debt, however, hit 14.3 billion dollars in early June and has increased in the past week to reach 14.9 billion dollars last week.

The domestic debt is mainly held by commercial banks (53 percent), insurance companies (9.4 percent) and pension funds (26 percent), among others.

External public debt has also increased significantly, hitting at about 12 billion dollars in June. The debt stood at 10.9 billion dollars in March, rising from 9.8 billion in June, 2013, according to Treasury.

The money comprises of debt owed to bilateral lenders (30.2 percent), multilateral (61.9 percent), commercial banks (6.3 percent) and suppliers' credit (2 percent).

The current total debt stock is equivalent to about 55 percent of GDP, compared to 51.7 percent of GDP in June 2013.

Treasury notes Kenya's public debt is manageable and is in line with the East African nation's debt strategy. 


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