Kenya could cut domestic borrowing by nearly 50 per cent this financial year to boost the private sector and grow the economy, President Uhuru Kenyatta has said.
The Treasury will borrow around Sh100 billion in the 2014/2015 financial year, down from the Sh190 billion range the year before, he told international media in an interview at State House, Nairobi, before travelling to Washington DC for the US-Africa Leaders Summit.
“Our objective is to reduce our initial intended borrowing, which is about Sh190 billion, and see if we can reduce our exposure in the domestic market to about Sh100 billion,” President Kenyatta said.
These developments follow the success of Kenya’s debut Eurobond, which netted $2 billion. Kenya sought to raise $1.5 billion, but ended up bagging $2 billion.
President Kenyatta said he is optimistic that the reduction of domestic borrowing will lower interest rates, accelerate economic growth and create employment for the country’s youth.
Previously, the domestic markets were the biggest source of Government borrowing to finance budget deficits – a move that raised interest rates.
With the new money from the bond, the Government is confident that it has created room for banks to lend to the private sector.
“The extra supply of cash will, therefore, hopefully help to bring down bank lending rates to the productive sectors of the economy,” the President said.