Bloomberg News

Kenyan First-Quarter Borrowing Misses Target; Deficit Widens

November 15, 2011

(Updates with analyst’s comment in third, fifth paragraphs.)

Nov. 15 (Bloomberg) -- Kenya borrowed 12.3 billion shillings ($131 million) in the domestic market in the three months through September, less than a quarter of the 49.8 billion shillings targeted, the Finance Ministry said.

East Africa’s largest economy expects to raise 119.5 billion shillings in the local debt market in the fiscal year through June, according to budget documents.

Tight liquidity in the Kenyan banking system due to higher interest rates has curbed demand for government debt, Andrew Mwangangi, head of fixed income at Kestrel Capital East Africa Ltd., said today by phone from Nairobi, the capital.

The Central Bank of Kenya has raised the key lending rate by a total of 10.25 percentage points over the last two months to 16.5 percent to curb inflation, which is almost quadruple the government’s target at 18.9 percent, and stabilize the shilling. The currency has declined 14 percent against the dollar this year.

“The below-target domestic borrowing shows their tightening stance is affecting their borrowing programs,” Mwangangi said. “The biggest lenders to the government are banks and they are seeing that the market is tight and they don’t have much cash to lend. It’s probably going to remain through the second quarter.”

Kenya also missed its revenue target for the first quarter of 2011-12, gathering 149.1 billion shillings, below the goal of 179.4 billion shillings, the Nairobi-based ministry said in a statement on its website today. The country’s fiscal deficit, excluding grants, widened to 43.6 billion shillings, or 1.3 percent of gross domestic product, from 22.3 billion shillings, or 0.8 percent, a year earlier, the ministry said.

--Editors: Heather Langan, Karl Maier

To contact the reporter on this story: Sarah McGregor in Nairobi at smcgregor5@bloomberg.net

To contact the editor responsible for this story: Andrew J. Barden at barden@bloomberg.net


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