By Clinton Ochieng
The Parliament has asked National Treasury to reduce its domestic borrowing target in the 2021-22 financial year by 193 billion Shillings, setting the stage for the government to head to the international debt markets.
The recommendation is a reversal of the proposal by Cabinet Secretary Ukur Yatani in his Budget Policy Statement earlier this year that Treasury would borrow 592 billion Shillings locally and 345 billion Shillings from the external market.
This is estimated to boost liquidity in the economy as commercial banks will increase lending to the private sector as opposed to heavy lending to the government in the recent past.
Data from the Capital Markets Authority showed that investors last year put a record 690 billion Shillings in Treasury bonds on the back of uncertainty around the Covid-19 pandemic.
“The committee observes that measures adopted by the CBK during the pandemic such as the reduction in the cash reserve requirement from 5.25 percent to 4.25 percent and the CBK rate from 8.25 percent to seven percent did not meet their objective of lowering the cost of borrowing for the private sector,” said the committee
This has been compounded by reports from the private sector, particularly small enterprises, that banks have not provided affordable credit despite a push of policy reliefs by the Central Bank of Kenya (CBK).
READ: Kenyan Government 5% Ahead Of Its Domestic Borrowing Target