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XINHUA NEWS SERVICE REPORTS FROM THE AFRICAN CONTINENT

 

Kenya’s internal debt dips as apex bank tightens liquidity 

NAIROBI (Xinhua) -- Kenya’s domestic debt has declined by 203.9 million U.S. dollars after the government stopped borrowing from the Central Bank through overdraft.

The debt fell from 25.07 billion dollars at the end of July to 24.86 billion dollars last week, when the government did not take an overdraft, latest data from the Central Bank released on Monday shows.

Overdraft at the Central Bank is usually equated to printing of more cash, which increases liquidity in the market.

A higher liquidity in the market leads to decline of the value of the local currency against major world currencies, according to analysts.

However, liquidity has been tight in the market for the past two weeks as a result of low government spending, helping the shilling strengthen against the dollar to 100.40.

The low government spending can be partly attributed to failure by the government to borrow cash through the overdraft from the Central Bank as it seeks to manage mounting debt.

The peak of government borrowing through overdraft hit 568 million dollars at the end of June. Overall public debt currently stands at about 50 billion dollars, with domestic debt consisting of half the amount and foreign the rest.

Last week, the National Treasury announced it is seeking to recruit debt management experts to provide guidance on determination of borrowing ceilings for national and county governments, as well as preparing proposals for debt restructuring.

The move was in response to the rising concerns over debt sustainability of the East African nation, with public debt standing at 56 percent of the gross domestic product.

             

 

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