Government appetite for domestic borrowing crowds out private sector

The total debt that the Government has borrowed locally stands at Sh2.8 trillion. This is the money that Treasury borrows through such instruments as Treasury Bonds and Bills, about half of which is advanced by commercial banks.

The action has seen Treasury crowd out the private sector. Banks are most likely to lend to Government - seen as less risky. Private sector are seen to offer low returns especially since interest rates were capped.