Kenya financial stability report 2011 has an interest table (8) where they examine government indebtedness to CBK. Treasury rediscounted bonds worth 11 billion and maxed out their overdraft limit to 25 billion. But the most surprising comment below the table read as follows.

Besides rediscounts, the government also exceeded the Overdraft Statutory Limit by about Ksh 0.8 billion in 2011, compared to underutilization of Ksh 0.2 billion in 2010. Accelerated borrowing from central bank is inflationary as it is equated to printing of money and therefore leads to macroeconomic instability through inflationary pressures.

Read more below on page 24:

http://www.centralbank.g...nancial-stability-report

What an admission by a central banker, that they're causing inflation. I remember someone telling me he heard some guy at MOF tell a foreigner that the fair value of the shilling was 90. But just like Githae and some of his statement seems people shoot from the hip, making statements without realizing the consequences.

Maybe the only way for the economy/GDP to grow is for government to spend, their spending is on administrative costs as the governor said. Cumulative interest payments on domestic debt are up 44% from 14.9 billion to 21.5 billion. From the cbk weekly the average time to maturity of government securities declined to 4 years and 9 months in September from 5 years and 4 months at the end of June 2012. Seems the country is heading further toward an adjustable rate mortgage - not a good sign when yields are edging up.

@Hisah the key question is who holds the debt? Banks...Insurance companies...Retirement Benefit Schemes etc

Interesting http://www.bloomberg.com...-debt-restructuring.html

@deal - also don't forget that KE has taken a lot of aid from IMF... You know the script esp if KES goes bonkers again...

T bills will be contained below 10% but you will see Longer dated instrument yields rise significantly. This was always on the cards anyway and it's a pity Prof didn't see it as far back as 2009. You don't loosen policy without target areas. Look at loosening as application of fertilizer. You don't spread fertilizer all over the place, otherwise you run the risk of excess weed growth which is costly to uproot!