This archive report was first published on 6 January 2020.
Published on January 6, 2020, Kenya's National Treasury has raised domestic borrowing for the current financial year by Ksh84.63 billion ($84 million). The adjustment is largely linked to the additional Ksh55.23 billion ($55 million) expenditure for development that is contained in the revised national budget.
Acting Treasury Secretary Ukur Yatani increased the cash the government is targeting to borrow from domestic investors by 19.5 per cent to nearly Ksh514.03 billion ($514 million) for the year to June in the latest monthly filing on the state's budget.
The Treasury's move comes as the Kenya Revenue Authority (KRA) struggles to meet tax targets in a slow economy, forcing the Treasury to reduce the taxman's target by Ksh100 billion ($100 million) to Ksh1.7 trillion ($17 billion).
Analysts say the additional domestic borrowing could increase the cost of bank deposits as lenders compete with the government for savings from high-net worth investors, denying bankers room to offer cheap loans to households and businesses.
According to Genghis Capital, the raised domestic debt target will send mixed signals to the market, despite the risk-on sentiment to private sector lending in the wake of rate cap repeal environment.
The Central Bank of Kenya cut its benchmark lending rate for the first time in more than a year in November, signalling to banks to lower the cost of loans. Economists say heavy state borrowing from the domestic markets pushed up short-term interest rates and crowded out private sector investment.
