Kenya’s National Treasury is shaking up the government securities market by inviting non-bank financial institutions to invest, aiming to diversify investors and curb high interest rates. With banks currently dominating the market, the Treasury plans to introduce reforms through the inclusion of pension funds and insurance companies. This move seeks to stabilize interest rates on government bonds which have soared to 18 percent recently.
By broadening the investor base, the Treasury aims to manage the cost of debt and enhance investor confidence. Commercial banks currently hold the largest share of government securities, but the Treasury is looking to shift this balance by tapping into non-banking institutions. This shift is part of a strategy to deepen the domestic bond market and create a stable yield curve.
The government’s borrowing from banks has significantly increased, prompting the need for diversification. With a focus on reducing reliance on banks for funding, the Treasury is exploring new avenues for financing, including external sources. As Kenya navigates its fiscal deficit, the Treasury’s role in reshaping the market landscape will be crucial for sustainable economic growth.
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