Tax Revenue Hits KES. 121.83Bn as High Liquidity Bolsters Bond Sale

Ordinary revenues for July totaled 122.2 billion shillings comprising tax revenue of 121.8 billion shillings and non-tax revenue of 348.9 million shillings.

The National Treasury’s gazettement of the statement of revenue and net expenditure for July 2021 also showed that the tax receipts came in higher 28.9 percent y/y, and in line with the monthly tax collection trend in the first 5 months of 2021; recording an average of 127.9 billion shillings.

Genghis Capital maintains that the tailwinds to elevated tax receipts are due to the tax measures introduced at the front end of the year, coupled with tightened administrative measures.

On the other hand, domestic borrowing in the maiden month of the fiscal year was reported at 119.7 billion shillings, partly issuing from the TAP Sale (37.4 billion shillings) of June primary issues together with the July primary bond issue (79.9 billion).

Public debt service costs totaled 89.3 billion shillings in July and represented 73.1 percent of the ordinary revenue collected. This was higher than the 65.9 percent average in the fiscal year.

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On expenditure, the only disbursement made in July was for recurrent expenditure (salaries and operations, and maintenance). It totaled 71.2 billion shillings; equating to 6.4 percent of FY2021/22 allocation and lower than the 8.3 percent on a pro-rated basis.

Genghis Capital decries the non-disbursement of development expenditure and also equitable revenue share to counties.

Overall, the statement excludes expenditure attributed to Ministerial Appropriations in Aid (AiA) that totals 446.2 billion shillings (KES 167.1Bn in recurrent and KES 279.1Bn in development) and at the moment, there’s no color on it.

For counties, the unlocking of grants totaling 39.9 billion shillings awaits the passage of the County Government Grants Bill 2021 currently in the Senate.

Fixed Income: High liquidity bolsters August primary bond sale

Secondary market activity remained steady on a w/w comparison at 20.9 billion shillings. The week’s trading activity was salient with outsized interest in the infrastructure bond (IFBs) segment that accounted for over half of the secondary market turnover.

With the coinciding primary bond sale in the week, T-Bill performance cratered to 29.3 percent which was the lowest performance since late March.

Yields on the 91-day and 182-day tenors continued their modest uptrend at the auction, while the yield on the 364-day tenor was muted at 7.418 percent.

In line with the expectation of higher subscriptions on account of the liquid environment, the August primary bond sale recorded an overall performance rate of 174.4 percent (KES 104.6Bn).

The apex bank accepted 80.3 billion shillings implying an exercising of the green shoe option (KES 20.0Bn) as the offer amount was 60.0 billion.

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Against the backdrop of this August primary bond sale, Genghis Capital notes that the secondary market interest will be heavy on the short-to-medium part of the yield curve coupled with IFBs.

The outstanding Term Auction Deposits (TADs) following last week’s Open Market Operations (OMO) totals 96.85 billion shillings at a weighted average rate of 5.339 percent.