Treasury bills in domestic debt hit historic low

By wazup on July 17, 2024 Comments Closed / 129 views

The share of Treasury bills in domestic debt has hit a historic low in the year to June on government’s efforts to contain debt management by resorting to securities with longer maturity period.

Latest data by the Central Bank of Kenya shows the stock of T-bills fell to Sh616 billion at the end of June 2024 accounting for 11.38 percent of the gross domestic debt.

The share of T-bills in internal debt has shrunk over the years from a high of 40.9 percent in 2001/02 to the present low.

According to Treasury, one of the optimal strategies of debt management in the domestic market is to, “Reduce refinancing risk through issuance of medium to long-term Treasury bonds.”

Notably, the proportion of bonds in domestic debt is also on a historic high hitting 85.5 percent with a value of Sh4.62 trillion at the end June this year.

The National Treasury deploys Treasury bills as a means to manage the liquidity, financial markets and the economy at large. However, bonds are primarily used to supplement the budget.

Towards mid-March and early April, the return on the 364-day T-bill rose to 16.99 percent levels last seen in September 2015.This comes at a time when access to credit is scare and the government is struggling to raise revenue to match its expenditure.

The returns from the one-year paper is the highest since October 2015 when the rate shot up to 22.36 percent.

Bonds have also recorded soaring coupon rates on account of need for more cash by the government.

Other notable domestic debt instruments comprise the overdraft facility at Central Bank. This facility allows the government to raise credit up to five percent of the ordinary revenue as per the latest audited accounts.

The overdraft facility as per the latest data stood at Sh61.42 billion (1.14 percent of domestic borrowing).

On year-to-year basis, gross domestic debt at the end of June 2024 was Sh5.41 trillion, with Sh615.9 in T-bills, Sh4.63 trillion and Sh61.02 in overdraft facility.