CBK Treasury overdraft hit Sh 64 billion

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 The Central bank of Kenya (CBK) shows an outstanding treasury overdraft of Sh 64.05 billion. The data is a result of the underperforming tax revenue streams and the high demand for capital to help in the ongoing fight against coronavirus. 

From March 1 through April 9, the Treasury has tapped Sh 33.58 billion from the overdraft facility, which clearly shows a reduced inflow of government securities and tax receipts. 

The money tapped by the Treasury from the overdraft is a temporary source of funds that will help the Treasury to finance salaries and repay debts. The money is usually accessed when the Treasury revenues from other sources are not flowing, yet spending demands are there.

However, economist have warned on the excessive use of the overdraft facility, arguing that it is equivalent to printing money, which puts the economy at a high risk of inflationary pressures. 

CBK also regards the overdraft facility as a direct creation of money, which should ideally be restricted to 5 percent on a maximum according to the recent audited revenue. 

Reduced business activities due to the coronavirus pandemic have brought in partial trade and travel restrictions, which will further deplete tax revenues.

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Anthony Kiratu is the Founder of Finsolutions. He is a financial analyst with over 5 years experience in research, investment advisory, valuation and financial modelling. Anthony is a member of the Institute of Certified Investment and Financial Analysts and Institute of Certified Public Accountants of Kenya. He is passionate about development of African Capital Markets through training of investors and dissemination of information for sound financial and investment decision making process. He is also a part-time lecturer in the Certified Investment and Financial Analyst course in the subjects of International Finance, Portfolio Management, Equity Investment Analysis, and Fixed Income Securities. Email: anthony@finsolutions.co.ke Contact: +254 780216631

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