Local capital market helps seal funding gap
CfC Stanbic Bank’s regional economist, Mr Jibran Qureishi who has said other financial markets in the region are not as vibrant or have restrictive regulations that make them less attractive. FILE PHOTO | NATION MEDIA GROUP
What you need to know:
- According to the Economic Survey released on Tuesday by the Kenya National Bureau of Statistics (KNBS), the government was able to borrow over Sh100 billion more in 2015 from the local market compared to 2014.
- In an indication of a more liberalised and deepening financial market, total domestic credit grew by 19.2 per cent compared to an expansion of 16.1 per cent in December 2014 supported by lending to the government.
Kenya’s robust financial market played a crucial role last year amid risk averseness and capital flight from emerging markets.
According to the Economic Survey released on Tuesday by the Kenya National Bureau of Statistics (KNBS), the government was able to borrow over Sh100 billion more in 2015 from the local market compared to 2014.
In an indication of a more liberalised and deepening financial market, total domestic credit grew by 19.2 per cent compared to an expansion of 16.1 per cent in December 2014 supported by lending to the government.
“This was as a result of increased credit to the national government that rose to Sh538.0 billion as at December 2015 compared to Sh424.9 billion as at December 2014,” KNBS data stated.
Analysts say Kenya is in an enviable position in the region when it comes to raising money internally to plug budget deficits.
CfC Stanbic Bank Regional Economist Jibran Qureishi said other financial markets in the region are not as vibrant or have restrictive regulations that make them less attractive.
Tanzania, which requires investors to hold a bond for at least a year, had quite a challenge in financing its deficit last year after donor funding was withdrawn following questions around the credibility of elections in Zanzibar.
“Tanzania did not even have a sovereign credit rating to go into the international market. It would love to have the appetite for bills and bonds like there is in Kenya,” Mr Qureishi said.
He said last year was, however, an outlier marked with the risk averseness in the international markets and capital flows away from emerging markets.
CBK statistics show that total securities issued by the government as at December 2015 stood at Sh1.4 trillion compared to Sh1.2 trillion during a similar period in 2014.
The market was especially interested in Treasury Bills, which are short-term credit rather than bonds that stretch mid to long-term.
Treasury Bills amounted to Sh389 billion in 2015 up from Sh294 billion in 2014 while Treasury Bonds increased from Sh953 billion to Sh1 trillion.
