Money Markets
The National Treasury Building in Nairobi. Figures by the Central Bank
show that the domestic debt declined to Sh1.245 trillion on maturity of a
raft of debt instruments. FILE PHOTO |
NATION MEDIA GROUP
By CHARLES MWANIKI, cmwaniki@ke.nationmedia.com
In Summary
- Domestic debt last dropped that low at the end of June when it stood at Sh1.25 trillion.
- Even with declining domestic debt, the country’s total debt is likely to keep rising when external borrowing is included due to the Eurobond and the standard gauge railway loans.
- With the economic rebasing, however, the debt to GDP ratio is going to decline from the previous 57 per cent, improving the country’s debt profile, which makes it easier to access external debt.
The government’s domestic debt has declined to
Sh1.245 trillion, with reduction reflected across Treasury bills, bonds
and the Central Bank overdraft holdings.
This is the lowest level in the current financial year largely driven by a raft of maturing debt instruments.
Latest domestic debt figures released by the
Central Bank show that the national government overdraft has fallen to
Sh25.9 billion from Sh38.9 billion three weeks ago, a reduction of 12.4
billion.
Maturities of Treasury bills and bonds have seen
the stock of government securities reduce by Sh24.9 billion in the week
ending September 21.
According to the CBK figures, the stock of T-bills has reduced by Sh11.7 billion, while that of bonds is down by Sh13.2 billion.
Domestic debt last dropped that low at the end of June when it stood at Sh1.25 trillion.
“A surge in liquidity due to maturing securities
may see the regulator intervene in the money market to mop up liquidity
and anchor the shilling,” said Genghis Capital analyst Vinita Kotedia.
Due to improved liquidity, the interbank rate has
fallen to 6.77 per cent, the lowest level since mid-June. A few weeks
back banks were grappling with double-digit rates as the Treasury
delayed releasing cash to counties and contractors.
The relatively low rate also comes at a time
inflation has also edged down by nearly two percentage points to 6.6 per
cent in September.
According to analysts, the decline in inflation is a
good signal for the fixed income market as it will reinstate investor
confidence in the economy and boost real earnings. This will reduce the
pressure for higher interest rates from investors buying government
securities.
Banks continue to hold more than half of the
securities issued, but they cut their stake by one percentage point in
the week to September 21 to Sh622.2 billion, from previous Sh646.2
billion.
Insurance companies, pension funds and other
investors who include Saccos, listed and private companies, self-help
groups, educational institutions, religious institutions and individuals
remained flat at Sh530 billion.
Even with declining domestic debt, the country’s
total debt is likely to keep rising when external borrowing is included
due to the Eurobond and the standard gauge railway (SGR) loans.
The government has said it intends to shift most of its borrowing from the domestic market to international lenders in order to help push down interest rates by forcing banks to lend more to the private sector.
The government has said it intends to shift most of its borrowing from the domestic market to international lenders in order to help push down interest rates by forcing banks to lend more to the private sector.
The Treasury’s last published figures at the end of
May showed external debt stood at Sh957.9 billion. But the number goes
up substantially when one factors in the Eurobond issue, which netted
the government Sh174 billion from external lenders in June.
Beginning this month, Kenya will also start to
receive tranches of the Sh327 billion loan money from China towards the
construction of the SGR, expected to pile on to the external liability.
With the economic rebasing, however, the debt to
GDP ratio is going to decline from the previous 57 per cent, improving
the country’s debt profile, which makes it easier to access external
debt.
No comments :
Post a Comment