Government replaces borrowers in banking halls
News
By
Otiato Guguyu
| Sep 28, 2017
The Government has doubled its loans from local banks to replace the private sector in loans uptake.
According to the latest Central Bank of Kenya data, advances from commercial banks to the State hit Sh11 billion in May, up from Sh5.4 billion in a similar period last year.
This is beside the weekly auctions of Treasury bills worth Sh708.5 billion during the month under review.
It is unclear why Treasury would rather take a loan from a commercial bank, especially given that by May, it had not made use of the CBK overdraft facility.
Crowded out
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Domestic borrowing by the Government has risen sharply, especially in the wake of the rate cap regime that has seen banks concentrate liquidity towards the State, sending fears in the industry that the private sector could be crowded out.
In fact, this has been so acute that private sector credit, which has been sluggish in the past two years, with growth coming in at 5.1 per cent last year, contracted by 1.5 per cent in the first seven months of this year.
“The Government has recently been increasing its fiscal deficits, largely due to infrastructure-led spending,” said Britam Asset Management CEO Kenneth Kaniu.
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