CBK gives State Sh4bn to plug budget deficit

The National Treasury office building.

The National Treasury office building. 

Photo credit: Diana Ngila | Nation Media Group

The Central Bank of Kenya (CBK) on Friday announced that it has paid the Treasury a Sh4 billion dividend, boosting the government’s cash position as it seeks to plug a widening budget deficit. The funds are in addition to the Sh5.5 billion the Treasury received in September last year from the banking sector regulator’s cash reserves.

This brings the total payout by CBK to Treasury since early 2021 to Sh14.5 billion, data shows.

“The Central Bank of Kenya announces that on September 12,2022 it transferred to the government consolidated fund Sh4billion as distribution from the CBK’s General Reserve Fund as at the end of financial year 2021/22. Consequently, CBK increased its paid-up capital from Sh35 billion to Sh38 billion” the regulator said in a statement.

“The increased paid up capital to Sh38 billion strengthens CBK’s financial position, enabling it to pursue its functions in a more volatile environment. Specifically, CBK will be able to better absorb losses that may arise from discharge of its functions; provide confidence that it will meet its domestic obligations; and cushion against shocks that may adversely affect its balance sheet” it added.

Bad blood

The dividend payoffs since early last year have helped thaw bad blood between the CBK and the Treasury. Treasury has in the past put CBK on the spot over revenues that should accrue to the State with Treasury Secretary Ukur Yatani at one point complaining that the banking sector regulator was one of the State corporations that had withheld payment of dividends to government despite orders to surrender the cash.

The latest dividend boosts the State’s cash position amid budget pressures and soaring debt. 

Kenya’s debt burden crossed the Sh8.61 trillion mark for the first time in July, new disclosures by the National Treasury showed, even as the government kick-started the race to source loans to fund the budget for the financial year 2022/23.