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The Treasury has cut its overdraft at Central Bank of Kenya (CBK) by Sh24.4 billion on the back of healthy Treasury bill and bond uptake at the auctions this month.

Latest CBK data on public debt shows that the outstanding overdraft amount stood at Sh39.5 billion as at January 18, down from Sh63.9 billion at the beginning of the year.

The Treasury had turned to the facility towards the end of 2018 following weeks of underperformance in securities’ auctions, which had led to the exchequer falling behind in its domestic borrowing target for the fiscal year.

The facility helps the Treasury’s short-term financing needs when it faces cash shortage, urgent payment requirements such as salaries and other recurrent expenditure as debt repayments.

“Current domestic debt in Kenya increased marginally to Sh2.55 trillion during the week ended 18 January 2019…partly attributed to increased borrowing by the government through T-bills (2.67 per cent up week on week),” said Standard Investment Bank in a fixed income note.

“The government, however, repaid part of it the CBK overdraft loan facility, which now stands at Sh39.47 billion, down 34.6 percent week-on-week.”

Borrowing through the overdraft is by law restricted to a maximum of five percent of the most recently audited revenues and must be repaid within 12 months of the date of borrowing.


The restriction followed massive abuse of the facility that is basically equal to printing cash during the Goldenberg mineral compensation scandal that kicked off in the early 1990s.

In the current mix of government debt, the overdraft accounts for 1.55 percent, down from 2.5 percent at the beginning of the year.

The bulk of the debt is held in form of Treasury bonds, which account for 60.8 per cent (Sh1.55 trillion), while Treasury bills account for 36.4 per cent (Sh928.5 billion) and other domestic debt 1.24 percent (Sh31.6 billion).

Appetite for the government securities has picked up significantly this month, helped by a liquid market, reversing weeks of undersubscription toward the end of last year.

The four auctions of Treasury bills have yielded bids worth Sh180.2 billion, against a target of Sh96 billion, with the government accepting Sh120.4 billion out of this amount.

This month’s Sh40 billion two- and 15-year bond issue were heavily oversubscribed, attracting total bids of Sh101.97 billion with acceptances of just Sh38.5 billion.