Kenya's domestic debt hits 19 bln USD

A spike in domestic borrowing mainly through Treasury bills and bonds has pushed Kenya's domestic debt to 19 billion U.S. dollars, official data from Central Bank of Kenya (CBK) showed Tuesday.

It is the highest level domestic debt has ever reached as the East African nation struggles to cover budget deficit and fund infrastructure projects amid low revenue collection.

The CBK data showed that at the end of last month, domestic debt stood at 18.6 billion dollars before rising to 19 billion dollars last week.

During the period, Treasury sold 15-year and 20-year bonds worth 297 million dollars for budgetary support.

The paper raised 143 million dollars at 13.5 percent interest rate for the 15-year paper while the 20-year bond attracted bids worth 76 million dollars at 14.3 percent.

From the amount, the CBK accepted bids worth 200 million dollars raising bonds percentage of the debt to 67 percent.

On the other hand, Treasury during the period sold bills worth 157 million dollars, with the papers attracting massive subscription.

The rise in domestic debt pushes the total public debt to slightly above 36 billion dollars, with external and internal debt contributing 48 percent and 52 percent each respectively.

Economic analysts have warned that the first rising loan poses fiscal challenges to the country, which may further affect its credit ratings in the international market. The country's credit rating currently stands at B+ for the long-term and B for the short-term.

The government's appetite for loans, according to Nairobi-based investment firm Cytonn, has increased due to significant investment in infrastructure projects, borrowing money from the market at high rates and slow growth in revenue collection compared to the budget growth.

The revenue growth has averaged 14.2 percent over the last five years while budget growth has been at 15.4 percent over the same period resulting into more borrowings to fund the deficit. Endit