On Tuesday, November 20, 2018, the Treasury sharply reduced its emergency borrowing from the Central Bank of Kenya, a sign that recent market auctions had improved the government’s cash position.
Data from the monetary authority showed the overdraft had fallen to Sh8.43 billion from Sh25.17 billion in the previous week. The decline came after four straight weeks of rising borrowing up to November 2, followed by a period in which the national government had drawn little credit from the CBK in the two weeks before October 19 before the trend turned upward again.
The improvement in liquidity followed strong auction performance. Last week, the government accepted Sh50.1 billion in cash from the market. The 91-day and 364-day Treasury bills were oversubscribed, attracting nearly Sh20 billion against an offer of Sh14 billion, while a 20-year infrastructure bond raised Sh27.6 billion for the Treasury.
The CBK overdraft is meant to be a short-term facility and is supposed to stay within five per cent of the most recently audited revenues. It must also be repaid by the end of the fiscal year.
When the government faces a cash shortage, the central bank steps in to cover urgent obligations such as salaries, recurrent spending and debt repayments. The Treasury usually leans on the facility when auctions fail to attract enough investor interest, or when the CBK rejects bids it considers too costly.
