This archive report was first published on 11 July 2020.
Published on July 11, 2020, the COVID-19 pandemic has had a silver lining for the National Treasury, enabling it to secure cheap loans from local investors. The Central Bank of Kenya (CBK) accepted bids worth Sh46.2 billion in its first auction of Treasury Bills for the 2020-21 financial year, with the 91-day Treasury Bill being bought at an average rate of 6.2 per cent, the lowest since July 8, 2013.
For investors, this is significantly lower than the average interest rate of 7.07 per cent they received for money deposited with commercial banks as of March 2020, according to data from CBK. Despite the low returns, investors have been flocking to government papers, with the latest offer being over-subscribed by a staggering 358 per cent.
CBK received bids worth Sh85.9 billion against an offer of Sh24 billion, with the 91-day Treasury Bill having the highest performance rate at 948.1 per cent. The 182-days T-bill was over-subscribed by 273.7 per cent, while the 364-day paper saw a performance rate of 206.6 per cent.
CBK Governor Patrick Njoroge downplayed concerns that the Treasury's borrowing might crowd out the private sector, noting that the government has a target for borrowing from the local market and will stop once it attains it. The private sector has been hard-hit by the pandemic, with many enterprises struggling to stay afloat.
