Kenyan Government 5% Ahead Of Its Domestic Borrowing Target

By Soko Directory Team / Published January 18, 2021 | 8:31 am

The government of Kenya is currently 5.0 percent ahead of its prorated domestic borrowing target, having borrowed 274.9 billion shillings domestically.

The amount borrowed by GoK is against the pro-rated target of 261.8 billion shillings, going by the government domestic borrowing target of 486.2 billion shillings as per the Budget Review and Outlook Paper (BROP) 2020.

“Given the high financing needs to support government initiatives, we foresee a likely upward revision of the domestic borrowing target before the end of the current fiscal year,” said analysts from Cytonn Investments.

In 2020, the government was ahead of its domestic borrowing target by 11.1 percent. This has not stopped it from borrowing as the economy now seems fully thriving on the wheels of debts.

Despite the fact that the government is 11.1 percent ahead of its domestic borrowing target at the end of 2020, it is expected that there will be a need for more borrowing as the Kenya Revenue Authority lags behind revenue collections.

According to the Treasury, tax cuts introduced in April 2020 to cushion businesses and households from the pandemic had resulted in persistent revenue shortfalls where collections for the five months through November 2020 declined by Kshs 100.7 bn, compared to a similar period in 2019.

The risk on interest rates stems from the rising debt levels and expected domestic maturities amounting to Kshs 531.6 bn, coupled with the limited fiscal space which might result in a slight upward pressure on the yield curve due to the pressure on the government to meet its domestic borrowing target.

At the same time, rates in the fixed income market have remained relatively stable due to the high liquidity in the money markets, coupled with the discipline by the Central Bank as they reject expensive bids.

Due to the current subdued economic performance brought about by the effects of the COVID-19 pandemic, the government will record a shortfall in revenue collection with the target having been set at Kshs 1.9 tn for FY’2020/2021.

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