Treasury trims use of CBK emergency loans

The Treasury has cut down the use of an emergency loan facility at the central bank to fund critical government expenditures to a six-month low, pointing to easing cash flow pressures in the first month of implementation of the William Ruto administration’s first full-year budget.

Outstanding overdraft dropped to Sh48.18 billion in the week of July, according to the latest Central Bank of Kenya filings, the lowest since Sh34.32 billion for the week ended January 20.

Read: Treasury's emergency loans at CBK surge to Sh63 billion

This came in a month after the CBK, the government's fiscal agent, exceeded long-term domestic borrowing through bond sales unlike a year ago.

The Treasury raised Sh82.01 billion from bond auctions against a target of Sh60 billion in the review month, the CBK data shows, compared with Sh15.72 billion realised in the same month last year when the country was heading into a tense presidential poll.

The weekly sale of Treasury bills — largely tapped for cash flow management —also posted a performance of 97.95 percent of the Sh120 billion goal last month, improved from 91.78 percent of Sh96 billion the year before.

The improved performance in domestic borrowing, albeit at higher interest costs, helped to ease liquidity bottlenecks for the government, reducing the need to use the emergency loan facility at the CBK.

The overdraft facility —a temporary source of cash to cater for priority payments and emergencies — is usually tapped by the Treasury when revenue streams such as tax receipts and borrowing do not flow into government accounts at a pace that matches expenditure demands.

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The facility helps the Treasury to finance short-term needs when it faces a cash shortage, including urgent payment requirements such as priority recurrent expenditures like debt repayments.

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