According to Kenya’s cabinet secretary for the national treasury Henry Rotich, the government has reduced its domestic borrowing by 70 billion Kenya shillings to 120 billion Kenya shillings.
By reducing local borrowing the Kenyan government has broadened its foreign-debt portfolio with bonds as it recently received an additional 750 million US dollars from international investors on the back of its maiden bond.
(READ MORE: Kenya’s Tap oversubscribed by 400%)
The government reopened its two billion US dollar sovereign bond that it issued in June through a process known as a Tap. The reopening of the bond saw East Africa’s biggest economy receive an oversubscription of about 400 per cent increasing the size of the existing bond to 2.75 billion US dollars.
In August, the government announced it planned to reduce its domestic borrowing by 47.4 per cent for the financial year 2014/2015. The government had intended to reduce its initial intended borrowing in the domestic market to about 100 billion Kenyan shillings.
Previously, the domestic markets were the key source of the government’s borrowing to finance the budget deficit as a result of the state being unable to meets its expenditure commitments using domestically raised revenue and externally sourced grants and borrowing.
Last year, the rate of increase in domestic borrowing outpaced external borrowing. Kenya’s public debt, hit 52 per cent of national output in 2013, up from 44.5 per cent the previous year. Still public debt remains one of the major economic policy issues confronting the Kenyan government.
The treasury is planning to exploit the huge investor appetite with plans for suksuk and diaspora bonds set for the next financial year.