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Kenya's domestic debts soar on cheaper credit

Xinhua, September 28, 2016 Adjust font size:

Kenya's internal debt has ballooned in the last three weeks to hit over 18 billion U.S. dollars following increased uptake of Treasury bills and bonds by the government.

The government has stepped up sale of the securities and absorption of bids from buyers as the appetite for the low-risk loans soars, especially among commercial banks.

Latest data from the Central Bank of Kenya indicates Wednesday that at the end of August, the internal debt stood at 17.8 billion dollars before rising to the current level mid-month.

During the period, the government floated several securities that were hugely oversubscribed by commercial banks, pushing up the debt by at least 200 million dollars.

Last week in the Treasury bills auctions, the government floated bids worth 59 million dollars each for the 182 and 364 days securities and 39 million dollars for the 91-day paper.

All the securities were massively oversubscribed enabling the government to borrow more than it had sought. For the 91-day paper, the government received bids worth over 63 million dollars and accepted 54 million dollars.

Similarly, for the 182 and 364 days securities, the government received bids worth over 100 million dollars from each and accepted 50 million dollars for the former and 73 million dollars for the latter.

Analysts noted that the domestic debt is likely to swell even more as yields fall on both the short and long-term papers, offering the government cheaper credit.

Rates for the short-term papers stand at between 7 and 11 percent, from a high of between 8 and 13 percent three week ago.

"There is cheaper credit in the domestic for the cash-strapped government. The falling rates and increased appetite for the loans from banks have offered the perfect conditions for government to borrow. The domestic debt will, therefore, continue to rise," said Henry Wandera, an economics lecturer in Nairobi.

Overall, Kenya's public debt stands at 39 billion dollars, having surged significantly due to intensified borrowing from external sources for infrastructure projects. Endit