Kenya has been a state filled with debts. Borrowing among top state agencies has been turned into some kind of hobby.
The treasury has also majorly depended on loans to run the state.
The Treasury borrowed an average of Sh2.1 billion every day, racking up Sh126.4 billion in loans between January and February and raising Kenya’s total debt load to Sh5.4 trillion.
Latest debt data published by the Central Bank of Kenya (CBK) shows that domestic debt rose by Sh142.6 billion to Sh2.692 trillion in the period, while external debt contracted by Sh22 billion to Sh2.707 trillion.
The government has upped its borrowing through Treasury bonds and bills this year, taking advantage of high demand from investors.
The accelerated borrowing from the domestic market—mainly banks— is however bad news for the private sector, which has been struggling to secure loans from the lenders.
In the 12-months to February, credit to the private sector grew by 3.4 percent, still far below the 12 to 15 percent considered to be ideal for powering strong economic growth. Commercial banks’ holdings of government debt went up by 13 percent in the same period, to Sh1.46 trillion.
Heavy borrowing by the Jubilee administration has seen the threshold of debt to gross domestic product (GDP) cross well over the 50 percent mark, raising concerns over ability to repay the loans.
The Treasury’s appetite for more debt from domestic lenders is likely to continue due to lower-than-targeted revenue performance by the Kenya Revenue Authority.
The target for domestic borrowing for the current fiscal year stands at Sh310 billion, while external creditors are expected to plug in Sh321.5 billion in order to fill the Sh635 billion fiscal deficit.
By the end of February, the government had borrowed 66 percent of the domestic target from the market.
In the first quarter of the year, Treasury bill subscriptions averaged 147 percent.
Even with the rejection of expensive bids by CBK, the stock of outstanding securities rose by Sh67.5 billion in the first two months of 2019.
Treasury bonds have also become a favourite for investors. In January and February, the Treasury sought a total of Sh102 billion in bond auctions (including one tap sale), receiving total bids of Sh247 billion and accepting Sh115.3 billion.