The Treasury borrowed an average of Sh2.1 billion every day, racking up Sh126.4 billion in loans between January and February and raising Kenya’s total debt load to Sh5.4 trillion.
Latest debt data published by the Central Bank of Kenya (CBK) shows that domestic debt rose by Sh142.6 billion to Sh2.692 trillion in the period, while external debt contracted by Sh22 billion to Sh2.707 trillion.
The government has upped its borrowing through Treasury bonds and bills this year, taking advantage of high demand from investors.
The accelerated borrowing from the domestic market—mainly banks— is however bad news for the private sector, which has been struggling to secure loans from the lenders.
In the 12-months to February, credit to the private sector grew by 3.4 percent, still far below the 12 to 15 percent considered to be ideal for powering strong economic growth. Commercial banks’ holdings of government debt went up by 13 percent in the same period, to Sh1.46 trillion.
Heavy borrowing by the Jubilee administration has seen the threshold of debt to gross domestic product (GDP) cross well over the 50 percent mark, raising concerns over ability to repay the loans.
The Treasury’s appetite for more debt from domestic lenders is likely to continue due to lower-than-targeted revenue performance by the Kenya Revenue Authority.
The target for domestic borrowing for the current fiscal year stands at Sh310 billion, while external creditors are expected to plug in Sh321.5 billion in order to fill the Sh635 billion fiscal deficit.
By the end of February, the government had borrowed 66 percent of the domestic target from the market.
In the first quarter of the year, Treasury bill subscriptions averaged 147 percent.
Even with the rejection of expensive bids by CBK, the stock of outstanding securities rose by Sh67.5 billion in the first two months of 2019.
Treasury bonds have also become a favourite for investors. In January and February, the Treasury sought a total of Sh102 billion in bond auctions (including one tap sale), receiving total bids of Sh247 billion and accepting Sh115.3 billion.
The Treasury, however, took advantage of the high inflows from the securities market to cut its outstanding overdraft at CBK by Sh26 billion to Sh19.7 billion in the period.
Maturing securities are expected to keep the market liquid, which should make it easier for the Treasury to achieve its borrowing target.
External borrowing has been harder for the government, which has in the past few months said it is being held back by high interest demands especially for commercial debt.
The Treasury is yet to issue the expected Eurobond well into the second half of the fiscal year, and is instead mulling taking up a syndicated loan to roll over maturing foreign debt.
The medium term debt strategy report released by the Treasury in February revealed concerns over the sustainability of the external debt load.
The proposal is to cap external deficit financing at 38 percent, while raising domestic borrowing to 62 percent.
World Bank pushes G-20 to extend debt relief to 2021
World Bank Group President David Malpass has urged the Group of 20 rich countries to extend the time frame of the Debt Service Suspension Initiative(DSSI) through the end of 2021, calling it one of the key factors in strengthening global recovery.
“I urge you to extend the time frame of the DSSI through the end of 2021 and commit to giving the initiative as broad a scope as possible,” said Malpass.
He made these remarks at last week’s virtual G20 Finance Ministers and Central Bank Governors Meeting.
The World Bank Chief said the COVID-19 pandemic has triggered the deepest global recession in decades and what may turn out to be one of the most unequal in terms of impact.
People in developing countries are particularly hard hit by capital outflows, declines in remittances, the collapse of informal labor markets, and social safety nets that are much less robust than in the advanced economies.
For the poorest countries, poverty is rising rapidly, median incomes are falling and growth is deeply negative.
Debt burdens, already unsustainable for many countries, are rising to crisis levels.
“The situation in developing countries is increasingly desperate. Time is short. We need to take action quickly on debt suspension, debt reduction, debt resolution mechanisms and debt transparency,” said Malpass.
Kenya’s Central Bank Drafts New Laws to Regulate Non-Bank Digital Loans
The Central Bank of Kenya (CBK) will regulate interest rates charged on mobile loans by digital lending platforms if amendments on the Central bank of Kenya Act pass to law. The amendments will require digital lenders to seek approval from CBK before launching new products or changing interest rates on loans among other charges, just like commercial banks.
“The principal objective of this bill is to amend the Central bank of Kenya Act to regulate the conduct of providers of digital financial products and services,” reads a notice on the bill. “CBK will have an obligation of ensuring that there is fair and non-discriminatory marketplace access to credit.”
According to Business Daily, the legislation will also enable the Central Bank to monitor non-performing loans, capping the limit at not twice the amount of the defaulted loan while protecting consumers from predatory lending by digital loan platforms.
Tighter Reins on Platforms for Mobile Loans
The legislation will boost efforts to protect customers, building upon a previous gazette notice that blocked lenders from blacklisting non-performing loans below Ksh 1000. The CBK also withdrew submissions of unregulated mobile loan platforms into Credit Reference Bureau. The withdrawal came after complaints of misuse over data in the Credit Information Sharing (CIS) System available for lenders.
Last year, Kenya had over 49 platforms providing mobile loans, taking advantage of regulation gaps to charge obscene rates as high as 150% a year. While most platforms allow borrowers to prepay within a month, creditors still pay the full amount plus interest.
Amendments in the CBK Act will help shield consumers from high-interest rates as well as offer transparency on terms of digital loans.
Scope Markets Kenya customers to have instant access to global financial markets
NAIROBI, Kenya, Jul 20 – Clients trading through the Scope Markets Kenya trading platform will get instant access to global financial markets and wider investment options.
This follows the launch of a new Scope Markets app, available on both the Google PlayStore and IOS Apple Store.
The Scope Markets app offers clients over 500 investment opportunities across global financial markets.
The Scope Markets app has a brand new user interface that is very user friendly, following feedback from customers.
The application offers real-time quotes; newsfeeds; research facilities, and a chat feature which enables a customer to make direct contact with the Customer Service Team during trading days (Monday to Friday).
The platform also offers an enhanced client interface including catering for those who trade at night.
The client will get instant access to several asset classes in the global financial markets including; Single Stocks CFDs (US, UK, EU) such as Facebook, Amazon, Apple, Netflix and Google, BP, Carrefour; Indices (Nasdaq, FTSE UK), Metals (Gold, Silver); Currencies (60+ Pairs), Commodities (Oil, Natural Gas).
The launch is part of Scope Markets Kenya strategy of enriching the customer experience while offering clients access to global trading opportunities.
Scope Markets Kenya CEO, Kevin Ng’ang’a observed, “the Sope Markets app is very easy to use especially when executing trades. Customers are at the heart of everything we do. We designed the Scope Markets app with the customer experience in mind as we seek to respond to feedback from our customers.”
He added that enhancing the client experience builds upon the robust trading platform, Meta Trader 5, unveiled in 2019, enabling Scope Markets Kenya to broaden the asset classes available on the trading platform.