8 February 2013

Kenya: CBK Seeks Sh15 Billion for Budgetary Support

THE Central Bank is seeking to raise Sh15billion through two new Treasury Bonds issued yesterday.The money will be used to support the budget and is part of the government's borrowing plan for this financial year.

The Sh15 billion bonds are divided into two, one for a two-year tenor and another for a 15-year period.The bond will be listed on the Nairobi Securities Exchange with secondary trading beginning on February 26. The bonds will be sold between February 6 to February 19.

The two-year bond interest rate or the coupon rate will be market determined while the 15-year one is priced at 11.25 per cent.The two-year bond is set for redemption on February 23, 2015 while the 15-year will be redeemed on February 7, 2028.

CBK said discount and interest payments on the bond will be subject to withholding tax at a rate of 15 per cent for the two-year bond and 10 per cent for the 15-year bond.

As at end November 2012, public and publicly guaranteed debt stood at Sh1.8 trillion or 46.11 per cent of GDP. The increase of 2.4 per cent over the end October 2012 position is attributed to increase in both domestic and external debt.

Domestic debt increased by Sh29.12 billion to stand at Sh958.44 billion, while external debt increased by Sh12.41 billion to stand at Sh824.58 billion in November 2012.

Commercial banks held the largest proportion of the outstanding Government debt securities amounting to Sh479.22 billion or 50 per cent. The non banks held 42.97 per cent of the outstanding Government paper, mostly Treasury Bonds.

The non banks category comprising non bank financial institutions, National Social Security Fund, parastatals, insurance companies, building societies, pension funds and individuals. Government debt worth Sh10.14 billion were held by non residents who invest through nominee accounts in the local banks.

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