Posted On: 31-07-2024

Government Takes Emergency Loan from CBK

The National Treasury recently obtained an emergency loan of KSh 22.6 billion from the Central Bank of Kenya (CBK) to manage its cash flow and avert financial strain. This borrowing is the highest weekly overdraft recorded since January of the previous year. The move comes amid ongoing financial pressures, partly due to protests against new taxes and underperforming revenue collections.

According to data from the CBK, the Treasury's current borrowing from the central bank has risen to KSh 91.8 billion, representing 4.65% of the total domestic government debt, an increase from KSh 60.19 billion, which constituted 1.27% in the prior week.

This latest overdraft surpasses the previous high of KSh 30.2 billion recorded in January 2023. The surge in borrowing is largely attributed to the government's need to service debts, particularly a maturing Chinese loan, amid sluggish revenue inflows.

Treasury Principal Secretary Chris Kiptoo explained that the overdraft was primarily required to cover government expenses for salaries and emergency needs. He mentioned that KSh 26.1 billion in Treasury bonds will mature soon, with the expectation that this amount will be replenished in the upcoming auction.

Government officials have acknowledged the strain caused by slow tax collections, particularly with the ongoing protests disrupting economic activities. The situation has forced the government to rely heavily on CBK financing to meet its obligations. This has pushed the outstanding overdraft closer to the statutory limit of KSh 94 billion, which was set during the first week of December the previous year.

Efforts to get a comment from the Treasury regarding this situation were unsuccessful, as they failed to address inquiries sent by the media. Meanwhile, former Treasury Cabinet Secretary Prof. Njuguna Ndung'u, who previously held the position of CBK governor, noted that reliance on CBK overdrafts in the past was often linked to budget shortfalls and the need to print money, which could result in inflationary pressures.

The ongoing borrowing from CBK, particularly in the current economic climate, is a significant development that continues to attract attention and scrutiny.