NAIROBI, April 18 (Xinhua) -- Kenya in this fiscal year has borrowed more from internal than external sources despite the government planning to borrow more from the latter.
The government, data from the Central Bank showed Tuesday, has so far borrowed 2.3 billion U.S. dollars in this financial year that is some two months to a close, against a target of 1.7 billion dollars.
On the other hand, the government has borrowed some 2 billion dollars of the budgeted foreign borrowing, which was 4.6 billion dollars representing 45 percent of the targeted amount.
The East African nation's public debt currently stands at 37 billion dollars, according to the apex bank, with domestic borrowing accounting for 19.5 billion dollars and external sources the rest of the amount.
Analysts noted that with only two months remaining to the close of the financial year, the government is expected to intensify borrowing from the domestic market to avoid lengthy process involved in sourcing funds externally.
"Given that the government has less than 2.5 months to the close of the current fiscal year and the fact that borrowing from the foreign market is a much longer process than borrowing from the domestic market, the government is likely to use the domestic market to plug deficit that is likely to arise," said Cytonn, a Nairobi-based investment firm.
Massive borrowing internally, according to Cytonn, however, creates uncertainty in the domestic interest rate environment as it exerts upward pressure on yields, resulting in longer term papers not offering investors the best returns on a risk-adjusted basis.
However, despite seeking most of its funds locally, the government has rejected bids that are above market. In the last three Treasury bills and bonds auctions, the government has rejected expensive bids from investors given that domestic borrowing is ahead of target.
Last week, the Kenya government re-opened two bonds to raise 291 million dollars for budgetary support. Analysts noted that while the bond may be oversubscribed, the government would reject higher bids.
Kenya Revenue Authority missed its first half of 2016/2017 fiscal year revenue collection target by 3.2 percent, and it is expected not to attain its overall revenue collection target of 15 billion dollars, an indication that the government would borrow more to plug the deficit.
