The Kenya Revenue Authority (KRA) released the yearly revenue performance for FY 2022/2023, highlighting that the total revenue collected was KES 2.17 tn, equivalent to a 6.6% increase from the KES 2.03 tn collected in the previous fiscal year.
The growth was against a backdrop of a constrained business environment brought about by elevated inflationary pressures.
However, the government did not meet the fiscal year’s revenue targets, having achieved 98.8% of the KES 2.19 tn target amount under the supplementary Budget estimates.
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The Dollar Index
During the week, the US dollar index weakened by 3.2% against a basket of currencies, following a softer-than-expected June inflation estimate in the US, which dampened expectations for the peak in the Federal Reserve hiking cycle.
The shilling continued to weaken against major currencies, retreating 0.3% against the dollar. On a year-to-date basis, the shilling has lost 14.6% against the USD, higher than the 4.5% depreciation recorded over the same period in 2022.
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The Securities
Yields on short-term and medium-term securities continue to rise faster than yields on long-term securities, reflecting short-term expectations of the country’s interest rate environment and the government’s heightened appetite for borrowing – the newly issued 5-year bond pushed the yield curve to a record high.
Some upward movement was also witnessed on the furthest tail of the yield curve. Specifically for Treasury Bills, the yields on the 364-day, 182-day and 91-day papers continued to rise to 12.452% (+20.2bps), 12.271% (7.2 bps), and 12.109% (+9.5bps), w/w respectively.
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The Bond
The July bond offers recorded an oversubscription, having received bids worth KES 51.8 bn translating to a 129.4% subscription rate against the KES 40.0 bn that was offered.
The performance was partly attributable to the improved liquidity in the money market and the relatively short tenor of the bonds. The new 5-year bond received the highest interest (72.7% subscription rate) with investor’s aggressive bids pushing the accepted rate to a record high.
The bonds’ weighted average yield came in at 16.3% and 16.8% for FXD1/2016/10 and FXD1/2023/05, respectively.
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