Interest on domestic borrowing falls

By JACKSON OKOTH

KENYA: The cost of government borrowing funds in the domestic market continued to drop marginally. This is as interest in this week’s auction fell by 0.027 basis points.

The yield on the 91-day Treasury bill declined to 9.405 per cent this week from 9.432 per cent a week earlier. The dynamism happened amid constant demand from investors seeking to lock in high returns.

The government was looking to raise Sh3 billion from this borrowing instrument but instead took Sh987 million a subscription rate of 46 per cent. “The downward upward trend is expected to persist as investors seek to lock in real returns,” analysts maintain.

In the coming week, the government will be seeking to raise a total of Sh9 billion, with Sh3 billion each using the 91-day Treasury Bill, the 182 days Treasury Bill and the 1 year Treasury Bill windows. A fall in appetite for Government paper is happening as the year hits the home stretch. On the sidelines, Kenya is faced with intense pressure to raise more money for ballooning Sh1.6 trillion budget, whose deficit is at Sh329 billion.

 The option left for the Government is also narrowing down to either borrows domestically or float a sovereign bond.  In its calculations, the Government plans to collect Sh986.2 billion in taxes and Sh491 billion in grants in the current financial year. Kenya’s economy is projected to grow at six per cent this year, up from 4.6 per cent last yea.

 This will overstretch the country’s push to meet its 10 per cent growth target. While the Government has in the past given assurances that it will keep interest rates low, raids on the domestic money market is a cause of concern. Government debt has also increased by Sh125.1 billion to reach Sh1.2 trillion by November this year.