Central Bank of Kenya Raises KSh64.176 billion via Sept. Treasury Bonds

• The Central Bank of Kenya (CBK) re-opened two 20-year bonds namely, FXD1/2012/20 ( 17.9 years to maturity) and FXD1/2019/20 (11.4 years to maturity) to raise KES.30Bn.

The Central Bank of Kenya has raised Ksh64.176 billion from the  triple-tranche re-opening  September Treasury Bonds against the advertised Ksh 50 billion.

The bonds: FXD2/2010/15 with a 5.3 years tenor and a 9.00 percent per annum coupon rate raised Ksh11.019 billion, FXD1/2020/15 with a 14.5 years tenor and a 12.756 percent per annum coupon rate raised Ksh45.692 billion and FX1/2011/20 with a 10.7 years tenor and a 10.00 percent per annum coupon rate raised Ksh7.465 billion.

The proceeds will be used for budgetary support in the current 2020/21 fiscal year.

The National Treasury projects ordinary revenue to decline from Kshs 1,643.4 billion in 2019/20 (revised estimates II) to Kshs 1,621.4 billion in 2020/21.

“The coronavirus outbreak already weakened Kenya’s fiscal balance in the fiscal year 2019/20 (year ending June 30, 2020) and we expect the impact to be felt through fiscal 2020/21, as weaker revenue collection and fiscal measures in response to the coronavirus pandemic delay fiscal consolidation,” according to Moody’s Investors Service’, Government of Kenya FAQ on credit risks arising from the coronavirus shock.

“Revenue growth will continue to slow and we expect will come in below the government’s targets for the year, reflecting the weak economy, an increasing growth contribution from sectors like agriculture that contribute less in tax revenue as well as tax cuts to stimulate the economy, particularly income taxes. We estimate the tax cuts will reduce tax revenue by about 1.5% of GDP in fiscal 2020/21.”

However, Cytonn Investments are of the view that the government plans to be cushioned by the earlier introduced measures such as: The Minimum Taxation of 1.0 percent of gross turnover for SMEs which will take effect from 1st January 2021, the 1.5 percent Digital Service Tax on gross transaction value, and expansion of the Excise duty tax base by reducing the threshold of alcohol strength for spirits from 10.0 percent to 6.0 percent.