Kenya's domestic debt at Sh1.32t

The Central Bank of Kenya. The contraction of Kenya’s economic growth from 5.2pc in the first quarter of 2013 to 4.1pc the same quarter in 2014 is worrisome.

The country's internal debt has hit Sh1.32 trillion (USD15 billion) following a rise in government borrowing, the Central Bank of Kenya has said.

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 Sh923 billion (USD10.5 billion) while Treasury bills stand at Sh308billion (USD3.5 billion).

TREASURY BILLS

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 Sh1.2trillion (USD14.1 billion). The debt has increased by more than Sh264billion (USD3 billion) 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 Sh74.3billion (USD845 million).

CUT DOWN APPETITE

Of Treasury bills and bonds, it is the value of the latter that has increased significantly during the period, growing by Sh40.5billion (USD460million) 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 Sh176billion (USD2billion) from sovereign bond sold to investors in Europe and US.

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 country.

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.

LOAN FROM INTERNATIONAL BANKS

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," Mr Rotich said.

Money raised from the bond, according to the official, will be used to fund infrastructure projects as well as pay off Sh52.8billion (USD600 million) loan acquired from several international banks including City Bank and Standard Chartered.

INSURANCE COMPANIES

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 Sh1.25trillion (USD14.2billion) by the end of June, which was about 30 per cent of GDP.

The debt, however, hit Sh1.26trillion (USD14.3billion) in early June and has increased in the past week to reach Sh1.3 trillion (USD14.9billion) last week.

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

TREASURY NOTES

External public debt has also increased significantly, hitting at about 12 billion dollars in June.

The debt stood at Sh959billion (USD10.9billion) in March, rising from Sh862billion (USD9.8billion) in June, 2013, according to Treasury.

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

Kenya's current total debt stock is equivalent to about 55 per cent of GDP, compared to 51.7 per cent 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.