March, 01, 2021The country is set to experience increased Interest rates on government debt, as a result of negative sentiment on the government’s fiscal position and fluctuating liquidity in the market.
According to Dyer & Blair investment bank, the upward pressure on interest rates is likely to be sustained by Increased debt service burden, coupled with the underperformance in revenue.
“Whereas we acknowledge the need for the government to commit to deficit reduction, we highlight that future deficits are already locked in by the debt refinancing burden and by the need to stimulate the economy post Covid-19,” said the investment bank in the note.
“Therefore, we expect fiscal deficit to remain elevated over the medium term implying that the associated upward pressure on interest rates will remain,” added the investment bank
The total domestic maturities and interest payments for the last four months of the fiscal year (March to June) add up to Sh315 billion, while the Treasury still needs to borrow Sh266.1 billion to fill its net borrowing target of Sh572.7 billion from the domestic market.
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