REPUBLIC OF KENYA MINISTRY OF FINANCE MONTHLY DEBT BULLETIN

Transcription

1 REPUBLIC OF KENYA MINISTRY OF FINANCE MONTHLY DEBT BULLETIN MARCH 2012

2 1.0 PUBLIC DEBT 1.1 Inroducion As a end March 2012, public and publicly guaraneed deb sood a Kshs 1, billion or 46.9 percen of GDP (see Table 1). The increase of 1.6 percen over he end February 2012 posiion is aribued o increased disbursemens from crediors and marginal depreciaion of he Kenya shilling agains he world major leading o an increase of Ksh billion in exernal deb as a end March (See Table 1). Table 1: Size of public deb, in billion Deb Caegory Kshs USD Domesic Deb Exernal Deb Toal 1, Source: Minisry of Finance The srucure of public and publicly guaraneed deb shows ha 56.8 percen deb is domesic deb while he res is exernal deb as shown in Char 1. Char 1: Composiion of public deb Exernal Deb 43.2% Domesic Deb 56.8% Source: Minisry of Finance 1.2 Cos/Risk Characerisics of Public Deb Reflecing Governmen exernal deb sraegy of conracing or guaraneeing exernal loans wih highly concessional erms o minimise ineres rae cos, he average ineres rae and grace period on he exernal deb porfolio was 1.0 percen and 7.6 years, respecively. In addiion, he average mauriy period for exernal loans was 24.1 years while he average gran elemen was 68.5 percen. As an indicaion of he success in lenghening he mauriy srucure of domesic deb o minimise refinancing risk in line wih he Medium Term Deb Sraegy, he average mauriy profile of ousanding Governmen domesic deb sood a 5 years 5 monhs a end March Page 1 of 16

3 1.3 Movemen in Exchange Raes Table 2 shows marke indicaive end-monh foreign exchange raes for he period January 2012 o March The Kenya shilling depreciaed marginally agains he Serling Pound and US Dollar by 0.4 percen and 0.1 percen respecively, bu appreciaed agains Euro and Japanesse Yen by 0.8 percen and 2.1 percen respecively. The Kenya shilling sood a Kshs o he US Dollar a end March Movemens in he exchange rae have implicaions on boh he size of he exernal deb and he cos of deb service. The srenghening of he Kenya shilling in he pas decreases he exernal deb sock and also leads o lower coss of exernal deb service. Table 2: Movemen in exchange raes Currency January 2012 February 2012 March 2012 US Dollar STG Pound Euro JPY(100) Char 2 shows he rends in daily exchange raes beween Kenya Shilling and he four major foreign currencies from November 2011 o March Char 2: Kenya Shilling Exchange Rae E x c h a n g e R a e s GBP EURO JPY USD Page 2 of 16

4 2.0 EXTERNAL DEBT 2.1 Size of Public and Publicly Guaraneed Exernal Deb Overall, public and publicly guaraneed exernal deb increased by Kshs billion from Kshs billion in February 2012 o Kshs billion in March 2012 as shown in Table 3. Table 3: Exernal deb sock, in billions February 2012 March 2012 C redior Caegory Kshs USD Kshs USD Bilaeral M ulila eral G uaraneed O hers Toal S our ce: M inisr y of Fina nce The increase was observed in boh mulilaeral and bilaeral exernal deb which increased by Kshs 6.08 billion and Ksh 8.83 biliion on accoun of disbursemens and depreciaion of he Kenya shilling agains he major world currencies. The high proporion of deb from official exernal sources demonsraes a conscious effor o conrac loans on concessional erms. Char 3 below illusraes ha 35 percen of Kenya s exernal deb is denominaed in he Euro while abou 7 percen is in oher currencies e.g. Kuwai Dinar, Swiss Franc, ec. Char 3. Currency Composiion U. S. d o l l a r 2 7 % Y u a n 4 % O h e r s 7 % E u r o 3 5 % P o u n d s e r l i n g 6 % J a p a n e s e y e n 2 1 % Source: Minisry of Finance 2.2 Srucure of Exernal Deb by Credior Official crediors accoun for 97.6 percen of he oal public and publicly guaraneed exernal deb, ou of which debs owed o mulilaeral crediors (Kshs billion including Kshs 3.74 billion guaraneed deb owed o IDA) dominae he porfolio (61.6 percen of he oal). Bilaeral deb sands a Kshs billion (35.9 percen of he oal), which includes Kshs billion guaraneed deb, as shown in Char 4 and Annex 1. In he mulilaeral caegory, IDA, ADB/ADF, IMF and EEC/EIB accoun for he larges proporion of exernal credi, while Japan, France and Germany are he leading crediors in he bilaeral caegory. Supplier credi deb remains relaively unchanged as hese debs are no being serviced due o he curren dispues wih he crediors (see Annex 1). Page 3 of 16

5 Char 4: Exernal Deb by Credior E x e r n a l d e b s o c k % 61.7% 62.0% 61.7% 34.5% 35.1% 35.5% 35.9% 3.3% 3.2% 2.5% 2.4% Dec-11 Jan-12 Feb-12 Mar-12 Bilaeral Mulilaeral Ohers Source: Minisry of Finance 2.3 Projeced Cumulaive Exernal Deb Service Projeced cumulaive exernal deb service for he period o end March, 2012 sood a Kshs billion. Principal and ineres projecions for he monh of March, 2012 were Kshs 3.14 billion and Kshs 0.76 billion, respecively. Mulilaeral and bilaeral crediors consiue 49.8 percen and 50.2 percen, of he cummulaive projeced deb service, respecively during he period under review as shown in Table 4. Table 4: Cumulaive Deb Service Projecions as a end March 2012, in Kshs million Credior caegory Principal Ineres Toal Bilaeral 9, , , Mulilaeral 10, , , Commercial Toal 20, , , Source: Minisry of Finance Page 4 of 16

6 2.4 Acual Cumulaive Exernal Deb Service Acual cumulaive deb service as a end March 2012 was Kshs billion as refleced in Table 5. Acual principal and ineres paymens for he monh of March 2012 was Kshs 0.44 billion and Kshs 0.15 billion respecively. Table 5: Acual cumulaive exernal deb service as a end of March 2012, in Kshs million Credi caegory Principal Ineres Toal Bilaeral 8, , , Mulilaeral 9, , , Commercial Toals 18, , , Source: Minisry of Finance 2.5 Budge Deviaion The acual cummulaive deb service for March 2012 was below he projeced deb service by Kshs 0.88 billion. 2.6 Guaraneed Exernal Deb Under he Naional Governmen Loans Guaranee Ac, 2011, he governmen may issue guaranees so long as i does no exceed he ceiling which currenly sands a Kshs 200 billion. Beween February, 2012 and March, 2012 he amoun of public guaraneed exernal deb decreased by Kshs 1.56 billion o Kshs billion in March The decrease is due o he appreciaion of he Kenya shilling agains he Japanese Yen in which 90 percen of he guaraneed deb is owed. Table 6 shows he disbursed ousanding guaraneed deb sock by credior. Table 6: Guaraneed ousanding deb by credior, in Kshs million Credior January 2012 February 2012 March 2012 Japan 41, , , Canada U.S.A IDA (KR Concessionaire) 3, , , Toals 46, , , Source: Minisry of Finance Page 5 of 16

7 3.0 DOMESTIC DEBT 3.1 Cenral Governmen Domesic Deb As indicaed in Table 7, Governmen ne domesic deb increased by Kshs billion o Kshs billion. This is aribued o declining Governmen deposis in Cenral Bank of Kenya and Commercial Banks. Table 7: Governmen domesic deb, in Kshs billion January 2012 February 2012 March 2012 Gross domesic deb less Gov. deposis a CBK Gov. deposis a commercial banks Gov. advances o parasaals Ne domesic deb Governmen Domesic Borrowing During he monh of March 2012, Governmen securiies worh Kshs 41.0 billion were adverised. Bids worh Kshs billion were received, ou of which Kshs billion and Kshs billion were bids for he Treasury Bills and Treasury Bonds respecively. Successful bids amouned o Kshs billion agains he monhs redempions of Kshs billion leaving a surplus of Kshs 9.34 billion o exchequer. Table 8: Governmen domesic borrowing, in Kshs million Treasury Bills Treasury Bonds Toal Adverised 31,000 10,000 41,000 Bids received 46,352 15,143 61,495 Successful bids 29,466 15,038 44,504 Redempions (cos) 26,046 9,114 35,160 Ne domesic borrowing 3,420 5,924 9,344 Source: Minisry of Finance Page 6 of 16

8 Table 9: Domesic deb insrumens by holder, in Kshs billion Insrumen/Holder Commercial banks Non banks Cenral Bank of Kenya Non residens Toal Treasury bonds Treasury bills Ohers Toal Percenage Holding Commercial banks held he larges proporion of he ousanding Governmen deb securiies amouning o Kshs billion or 46.6 percen as shown in Table 9 and Char 5. The non banks held 45.0 percen of he ousanding Governmen paper, mosly Treasury Bonds. The non banks caegory comprises non bank financial insiuions, Naional Social Securiy Fund (NSSF), parasaals, insurance companies, building socieies, pension funds and individuals. Governmen deb securiies worh Kshs billion or 1.5 percen were held by non residens who inves hrough nominee accouns in he local banks. Kshs billion held by Cenral Bank of Kenya comprises of Repo Treasury Bills used for execuion of moneary policy. Char 5: Domesic deb by holder as a end March 2012 Non residens 1.5% Cenral Bank of Kenya 6.9% Non banks 45.0% Commercial banks 46.6% Page 7 of 16

9 3.3 Domesic Deb by Insrumens Char 6 shows ha as a end March 2012, 77.0 percen of Governmen domesic deb was in Treasury Bonds, 16.4 percen in Treasury Bills while he balance is mainly he overdraf a he Cenral Bank of Kenya. The srucure of he holding is consisen wih he deb sraegy of holding more domesic deb on longer daed insrumens o minimise refinancing risk and promoe developmen of domesic markes for Govermen deb. Char 6: Domesic deb by insrumen % P r o p o r i o n % % Treasury Bonds Treasury Bills Series1 Ohers Deb Insrumen Page 8 of 16

10 3.4 Ne Domesic Financing Table 10 shows ha as a end March 2012, he ne domesic financing sood a Kshs billion. Table 10: Ne domesic financing, in Kshs billion 3.5 Cumulaive Domesic Ineres Paymens June-2011 March-2012 Change Treasury Bills Treasury Bonds Long erm Sock Pre-1997 Gov. Overdraf deb (1.11) Oher of which Overdraf (from CBK) (17.80) Gov. deposis (6.70) Ne Domesic Credi As a end March 2012, Governmen acual cumulaive domesic ineres paymens sood a Kshs billion agains he cumulaive projeced ineres paymens of Kshs billion. Acual ineres paymens on Treasury Bonds and Treasury Bills amouned o Kshs billion and Kshs 5.7 billion respecively. The oal variance of Kshs 2.17 billion is aribued o rising ineres raes for Governmen securiies. Table 11: Domesic ineres paymens, in Kshs million Type of deb Projeced Acual Variance Treasury bonds 41, , (334.18) Treasury bills 8, , (865.05) Overdraf , , Pre-1997 overdraf deb (695.88) Toals 51, , (697.15) Page 9 of 16

11 3.6 Average Ineres raes for Treasury Bills Char 7 shows he monhly rends on average ineres raes for boh he 91-day and 182-day Treasury Bills since July During he monh of March 2012, he average ineres raes for he 91-day Treasury bills declined by 190 basis poins o 17.8 percen while he 182-day and 364-day Treasury bills decreased by 152 and 392 basis poins respecively o and percen per annum respecively. Char 7: Average ineres raes on Treasury Bills 91-days 182-days I n e r e s R a e P eriod 3.7 Yields on Treasury Bonds The Governmen has been implemening a Benchmark Bond programme o increase liquidiy around seleced Bonds and promoe secondary rading. One of he key objecives of he programme is o lower boh refinancing risk and cos of borrowing by he Govermen. Table 12 shows he yields on seleced benchmark Treasury Bonds in he secondary marke. The curve is invered reflecing he curren marke rends wih high yields a he shor end of he marke bu rending upwards in he mid o long erm as illusraed in Char 8. Table 12 :Yields on seleced Treasury Bonds Tenure Rae (%) 2 YR 15.98% 5 YR 14.58% 10 YR 13.38% 15 YR 13.25% 20 YR 13.38% 25 YR 13.45% Page 10 of 16

12 Char 8:Yields on seleced Treasury Bonds 17.00% 16.00% R a e % 15.00% 14.00% 13.00% 12.00% 11.00% 10.00% 2 YR 5 YR 10 YR 15 YR 20 YR 25 YR Tenure Page 12 of 16

13 4.0 DEBT SUSTAINABILITY 4.1 Inroducion Deb susainabiliy is defined as he abiliy of a counry o mee is deb obligaions wihou requiring deb relief or accumulaing arrears. There are inernaionally acceped measures of deb susainabiliy developed by inernaional organisaions such as he World Bank and IMF. One of hese measures is he Deb Susainabiliy Analysis (DSA). The various DSA measures of deb susainabiliy includes, ne presen value of oal public deb o Gross Domesic Produc (GDP), oal deb o expor raio and oal deb service o GDP measures among ohers. The Join World Bank-IMF DSA published on 23 November 2011 concludes ha Kenya s deb is susainable. The DSA compares deb burden indicaors o indicaive hresholds over a 20- year projecion period. A deb-burden indicaor ha exceeds is indicaive hreshold suggess a risk of expereiencing some form of deb disress. There are four raings for he risk of exernal deb deb disress: Low risk-when all he deb burden indicaors are well below he hreshold; Moderae risk-when deb burden indicaors are below he hresholds in he baseline scenario, bu sress ess indicae ha hresholds could be breched if here are exernal shocks or abrup changes in macroeconomic policies; High risk-when hebaseline scenario and sress ess indicae a proraced breach of deb or deb-service hresholds, bu he counry does no currenly face any repaymens difficulies; or In deb disress-when he counry is already having repaymen difficulies However, deb susainabiliy is measured in presen value erms and no in nominal erms. his enables similar comparison of he deb burden. Counries are clasiffied ino one of hree policy perfomance caegories (srong, medium, and poor) using he World Bank s Counry Policy and Insiuional Assessmen (CPIA) index, which uses differen indicaive hresholds for deb burdens in presen value erms depending on he qualiy of a counry s policies and insiuions. Kenya is raed a medium policy counry and as such is subjec o he following hresholds. Table 13: Deb susainabiliy hresholds Medium Performer Policy NPV of deb in percen of Deb Service in percen of GDP Expors Revenue Expors Revenue Page 13 of 16

14 Under he baseline scenario, Kenyas iniial exernal deb raios lised in he able below are well below all of he indicaive hresholds for a medium performaer, even if hey increase over he medium- erm reflecing a higher rae of deb accumulaion. As such, Kenya faces a low risk of exernal deb disress reflecing he limied reliance on exernal borrowing and an expeced improvemen in macroecononmic perfomance. Table 14: Exernal deb susainabiliy Indicaor (Threshold) PV of Deb o GDP Raio (40) PV of deb-o-expors raio (150) PV of deb-o-revenue raio (250) Deb service-o-expors raio (20) Deb service-o-revenue raio (30) Source: World Bank-IMF Deb Susainabiliy Analysis- Kenya (November 2011) Toal public deb(exernal and domesic) is also wihin susainable levels as illusraed below Indicaor (Threshold) PV of public secor Deb o GDP Raio (40) PV of public secor deb orevenue raio (250) Deb service-o-revenue raio (30) Source: World Bank-IMF Deb Susainabiliy Analysis- Kenya (November 2011) Page 14 of 16

15 ANNEX 1: STOCK OF PUBLIC AND PUBLICLY GUARANTEED DEBT BY SOURCE (IN KSHS MILLIONS) CREDITOR CENTRAL GOVERMENT BILATERAL Sock a end February 2012 Sock a end March 2012 Change AUSTRIA 1, , (141.60) BELGIUM 7, , (108.40) CANADA 1, , DENMARK 2, , (19.34) FINLAND (0.41) FRANCE 38, , , GERMANY 23, , (183.33) ITALY 2, , (54.96) JAPAN 62, , (2,004.15) NETHERLANDS 3, , (137.87) UK 2, , USA 4, , (30.32) PARIS CLUB OTHERS 5, , (57.75) NON PARIS CLUB 40, , , Sub oal 195, , , MULTILATERAL ADB/AFDB 56, , , EEC/EIB 11, , (119.85) IDA 281, , (4,765.40) IFAD 6, , (30.94) IMF 40, , , OTHERS 9, , (462.14) Sub oal 407, , , SUPPLIERS CREDIT 16, , (61.97) Sub Toal 619, , , GUARANTEED DEBT CANADA JAPAN 39, , (1,533.36) USA (35.05) IDA(KR Concessionaire) 3, , Sub Toal 43, , (1,564.23) GOK+ GUARANTEED TOTAL 663, , , Source: Minisry of Finance Page 15 of 16

16 Informaion in his publicaion may be reproduced wihou resricion provided ha due acknowledgemen of he source is made. Enquiries covering he publicaion should be addressed o: The Direcor, Deb Managemen Deparmen, Minisry of Finance 1s Floor, Treasury Building, Harambee Avenue P.O Box , Nairobi, Kenya Tel: (254) Fax: (254) Page 16 of 16