The Central Bank of Kenya (CBK) has raised its monthly target from bond sales to more than Sh100 billion in the current fiscal year from an average of Sh70 billion in the previous year, highlighting the increased pressure on the domestic market to fund the budget deficit.
The Treasury is now making two bond sales per month to meet its domestic borrowing target that was set at Sh987 billion in the June 2026 budget, while also rolling out a monthly switch bond issuance to ease pressure on repaying maturing debt.
The local market is expected to provide 80 percent of the State’s full year borrowing target of Sh1.2 trillion, with external lenders chipping in with Sh247.2 billion.
To meet this local target, CBK is selling Sh100 billion bonds this month, in two tranches of Sh50 billion each. The first sale comprising reopened 15 and 20-year papers from 2019 raised Sh57.5 billion from offers of Sh80.6 billion.
The second issuance opened on Tuesday, comprising reopened 30-year bonds that were initially floated in February 2011 and March 2026.
CBK governor Kamau Thugge reckons that local lenders have room to lend the higher amounts to government without distorting the growth of lending to the private sector, following persistent concerns that the State might end up crowding out businesses and households from bank loans.
Speaking on Thursday, the governor said that the government is confident of achieving its budget deficit financing even in the absence of a funding programme from the International Monetary Fund (IMF).
‘From a financing point of view…we have a fairly deep domestic financial market, and are able to mobilise the resources required,’ said Dr Thugge. To address refinancing pressure, the State has taken to issuing one switch bond per month, eyeing between Sh10 billion and Sh20 billion.