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Intensified borrowing pushes up Kenya's domestic debt

By Xinhua | November 30th 2015

Increased borrowing from the domestic market in the last two months has pushed up Kenya’s internal debt to Sh1.47 trillion ($14.4 billion), official figures show.

This is a rise of about Sh102 billion ($1 billion) from Sh1.38 trillion ($13.5 billion) where the domestic debt stood in early August before it started to surge, data from the Central Bank of Kenya (CBK) showed last week.

The debt has been on a faster rise as the CBK sought to bolster a weakening Kenyan shilling that was facing stiff pressure from international currencies, in particular, the US dollar.

The apex bank raised its benchmark rate to 11.5 percent, effectively helping to push up yields on the lucrative government securities.This in turn attracted massive interest from investors, making the bank to borrow more from the domestic market.

The CBK in the past auctions has been borrowing up to Sh20.4 billion ($200 million) in a week from 91, 182 and 364-day bills, whose interest rate surged to a high of 23 percent from 8.2 percent in July.

For the 182 and 364-day bills respectively, the bank had floated bills worth Sh12 billion, Sh 6.02 billion for each, and received bids amounting to Sh22.75 billion and Sh23.15 billion. It accepted Sh 8.67 billion from the 182 days and Sh7.96 billion for 364 days Treasury bills.

This increased intake saw the debt surge to Sh1.47 trillion, according to the CBK, from Sh1.38 trillion ($13.5 billion) where the domestic debt stood in early August.

Syndicated loan

On October 30, the debt stood at Sh1.45 trillion ($14.2 billion) and on October 16, Sh1.39 trillion ($13.6 billion) and Sh1.38 trillion ($13.5 billion) at the beginning of the same month, according to the CBK data.

The rise in domestic borrowing raises the overall East African nation’s public debt, which currently stands at Sh2.9 trillion ($28.4 billion) or 54 percent of the Gross Domestic Product, up from 52.8 percent in June, according to the Treasury.

External debt has also accelerated, with the government last month borrowing a syndicated loan of over Sh60 billion ($588 million) when it ran out of cash to finance projects in roads, energy, agriculture and water sectors.

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