23 December 2011
The Treasury has turned to international banks to borrow Sh54 billion ($600 million) to fund budgetary expenditure.
The money will plug its funding deficit for this year’s budget and ease liquidity pressure from the domestic market.
The government had previously expected to raise Sh119.5 billion from the domestic market, but a spike in interest rate disrupted this as investors have now kept off government borrowing market result to gross under subscription in the Treasury bill.
In this week’s auction, the 182-day T-bill raised Sh748.38 million against Sh3 billion on offer, while the 91-day T-bill, raised Sh2.1 billion against Sh4 billion needed.
Credit ratings
In an advertisement signed by Treasury PS Joseph Kinyua, the government plans to raise $600 million “by way of loan in US dollar or any major reserve currency from international markets”.
“The government is facing financing difficulties in the domestic markets owing to high inflation, but is resorting to higher external borrowing to compensate,” a statement by the Standard & Poor’s Ratings Services noted on Friday.
The rating agency affirmed Kenya’s sovereign credit ratings at ‘B+’ long-term and ‘B’ for short-term foreign- and local-currency hence bolstering treasury’s move.
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