On Friday, the government announced a decrease in short-term loan offers from investors through the sale of its treasury bills, indicating a potential funding challenge for covering its budget deficit.
According to the Central Bank of Kenya (CBK) weekly bulletin, the bank anticipated loans amounting to Ksh24 billion, but it only received offers totalling Ksh23.6 billion from investors.
The under-subscription of the government's securities represented a 98.2 per cent performance, contrary to the government's anticipated 100 per cent turnout.
"The Treasury bills auction of April 25 received bids totalling Ksh23.6 billion against an advertised amount of Ksh24.0 billion, representing a performance of 98.2 per cent," stated part of the weekly bulletin by the central bank.
The short-term loan offered by the investors to the government is to be made in three varied coupon payments, within 91, 182 and 365 days.
“Interest rates on the 91-day, 182-day, and 364-day. Treasury bills remained relatively stable,” CBK announced.
The proceeds would go into funding different government projects including infrastructural developments such as the construction of roads and water projects.
Despite the govt securities being considered risk-free investments, the under-subscription of the bills could be attributed to reduced investors’ confidence in the govt’s monetary policy.
Investor confidence in the country’s monetary policy has also been impacted by the weakening of the local currency against the dollar.
Kenya's shilling recently reverted to weakening. A report by CBK showed the local currency trading at Ksh133.16 against the green buck compared to the previous closing week when it traded at Ksh131.37.
Traders attributed the drop in the shilling to a high demand for the dollar by the manufacturers who sought to purchase raw products for their industries on the international front.
Investors' under-subscription of the treasury bills could also be linked to a liquidity squeeze on the country's money markets in recent weeks.
