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The East African : Aug 9th 2015
The EastAfrican NEWS AUGUST 8-14,2015 5 affordable option to pay off external debts hand plunge the country into a precarious debt position, particularly when the local currency strengthens. “Hedging is always useful but the government must be extra careful not to be on the losing side,” said Mr Gupta. Kenya’s external debt obliga- tions have increased 12 per cent in the past eight months alongside the weakening of the Kenya shilling against the greenback. Data from Central Bank of Kenya shows that the shilling fell 12 per cent from Ksh90.79 on January 2 to Ksh101.32 against the dollar by August 4. “We are working with the cen- tral bank on our borrowing programme for this financial year. When we finish, we will make a decision depending on our exposure, but we will come up with a strategy that will reduce the cost of borrowing,” Mr Rotich told The EastAfrican. Kenya plans to increase its re- $4.11 billion 12pc Data from the Central Bank of Kenya shows that the shilling fell 12 per cent from Ksh90.79 on January 2 to Ksh101.32 against the dollar by August 4 this year. come necessary to safeguard the Kenya shilling,” she added. Amish Gupta, a director-in- charge of investment banking at Standard Investment Bank (SIB) argued that while hedging is a good idea, it may on the other Year 2010 2011 2012 2013 2014 Internal 5.15 6.03 7.42 8.58 10.33 Source: Economic Survey 2015 ≥egion’s impo≥t bill swells sector importers, who are seeking foreign currency to pay their import bills, saw the shilling weaken further but this has eased even as the Central Bank spent close to $3 million last week on a mopping up exercise. The gain, however, is only in Kenya with the other regional currencies experiencing a slump throughout the year due to an increased import bill, weak exports and other geopolitical factors. Tanzania’s shilling has shed 21.2 per cent with Uganda’s losing 20.6 per cent. The shilling is trading at close to 3-1/2 year lows and down 11.5 per cent against the dollar this year, although the central bank has hiked rates 3 percentage points since June. Last month, Tanzania hinted at in- troduction of monetary policies as a tool to save the weakening shilling. The country is the only one in the region that has been depending on fiscal policy as an intervention method to cushion its currency. Tanzania has seen its shilling struggle further during the second quarter of 2015, moving from 1,788 units to 2,107 units per dollar as at the start of this month. The rising import bill has seen re- gional currencies lose their competitive edge against the dollar even as the exports earnings remain weak. All the East Africa nations have seen their import bill rise, dimming hopes of bridging the deficit gap. For instance, Kenya’s import bill has increased to $8.6 billion dollars this year on account of increased inflows of industrial supplies and petroleum products compared with $7.9 billion over the same period last year. The Ugandan shilling is currently trad- ing at 3,495/3,505 due to high demand by private companies paying for clients’ imports. Uganda has raised its base lending rate from 12 per cent to 14.5 per cent in the last four months to tighten liquidity in the market. Faisal Bukenya, head of market mak- ing at Barclays Bank, said that the dollar inflow into the market is low with the little getting in being snapped up by dealers, explaining the pressure. “The demand for the dollar is at a high amid an increased local currency liquidity. This is keeping up the pressure on the local unit as everyone is out to get the dollar,” Mr Bukenya said. External 5.49 6.97 7.37 8.14 10.91 The overall budgetary shortfall of Ksh526.3 billion ($5.11 billion) is to be financed through net external financing of Ksh 340.5 billion ($3.28 billion) and domestic financing of Ksh 229.7 billion ($2.21 billion). KENYA’S PUBLIC DEBT (BILLION $) Total 10.64 13 14.79 16.72 21.24 CALL FOR PROPOSALS: FEASIBILITY STUDY ON THE DEVELOPMENT OF A CENTRALISED POINT OF DATA SUBMISSION FOR CREDIT INFORMATION SHARING The development of an effective Credit Information Sharing (CIS) mechanism in Kenya has evolved significantly since 2008 when substantive regulations were published. In 2009, the Central Bank of Kenya (CBK) and the Kenya Bankers Association (KBA) set up a full-time project to coordinate CIS in Kenya, with financing from the Financial Sector Deepening Kenya (FSD-K). The Credit Information Sharing Association of Kenya (CIS-Kenya) was later set up as the umbrella industry body responsible for overseeing the implementation of CIS in Kenya’s credit market. Since the formal rollout of CIS in July 2010 when banks started sharing data, the mechanism has witnessed significant growth in the number of participants. As the mechanism continues to gain acceptance, the number of lenders sharing information on borrowers through licensed Credit Reference Bureaus (CRBs) is expected to increase tremendously. In addition there are now three licensed CRBs operating in Kenya. In order for the mechanism to work effectively, all participating lenders must make data submissions to all the CRBs; resulting in an intricate process that can lead to inefficiencies if not well managed. CIS-Kenya is keen to make the process of data submission process more efficient, and proposes to put in place a centralized point of submission in accordance to Regulation 50 (6) of the CRB Regulations, 2013. We therefore wish to engage the services of an independent individual/firm/ consortium to carry out a feasibility study on the implementation of a centralised data submission platform to facilitate efficient transmission of data to CRBs. The individual/firm/consortium should meet the following requirements: • • • Proven experience on system development and analysis Excellent knowledge on IT security and Data Communications • Knowledge of the Credit Information Sharing mechanism, and/or other data sharing mechanisms Good understanding of financial sector systems and operations Proposals must meet the expectations as outlined in the detailed Terms of Reference available on www.ciskenya.co.ke/careers . Such proposals must be submitted on or before 12pm EAT on Friday 11th September 2015 at firstname.lastname@example.org. liance on external financiers to fund its 2015/2016 budget estimated at Ksh2.1 trillion ($20.27 billion). The overall budgetary short- fall of Ksh526.3 billion ($5..49 billion) is to be financed through net external financing of Ksh 340.5 billion ($3.28 billion) and domestic financing of Ksh 229.7 billion ($2.21 billion). IMF, through its debt sustain- ability analysis report for Kenya in April 2013, predicted that the biggest risks to the country’s external debt sustainability would come from exchange rate shocks and less favourable terms on new public sector loans. The report argued that the move by the National Treasury could see the government reduce external borrowing in favour of domestic borrowing through Treasury bills and bonds. Given the prevailing high in- terest rate regime in the country triggered by central bank’s decision to retain lthe CBR to rein in the weak currency, local borrowing would not be a better option either. According to CBK, Kenya’s public and publicly guaranteed debt rose by Ksh372.1 bil- “We are considering hedging mechanisms, but this is still premature at this stage.” Henry Rotich, Kenya’s Treasury Cabinet Secretary lion ($3.59 billion) to close at Ksh2.74 trillion ($26.45 billion), 51.2 per cent of gross domestic product in April 2015 from Ksh2.37 trillion ($22.88 billion), 44.2 per cent of GDP in June 2014. Kenya’s spending on public debt repayment was 70 per cent higher than its spending on development in 2013, according to a report by the United States Agency for International Development. Interest payments on exter- nal debt from the consolidated fund during the past financial year stood at Ksh29.73 billion ($287.06 million) and the figure is expected to rise to Ksh30.51 billion ($294.59 million) in the current financial year. According to financial es- timates for the 2015/2016 fiscal year, interest on domestic debt in 2014/2015 financial year stood at Ksh137.63 billion ($1.32 billion) and the figure is expected to increase to Ksh 154.81 billion ($1.49 billion) in the current financial year. The figures are likely to rise due to the depreciation of the shilling. The government plans to di- versify financing sources by continuing to access commercial sources of financing in the international financial market.
Aug 2nd 2015
Aug 16th 2015