Why Treasury Bill Rates Are Falling Despite High Investor Demand

Treasury bill (T-bill) interest rates dropped in the latest auction despite strong investor demand, as the Central Bank of Kenya (CBK) rejected costly bids. Investors offered Ksh33.14 billion against a target of Ksh24 billion, but CBK accepted only Ksh24.44 billion. The 91-day T-bill rate fell to 9.59 percent from 9.82 percent, while the 364-day rate dropped to 11.33 percent from 11.37 percent. The 182-day rate remained unchanged at 10.02 percent. The Business Daily reports that the recent decline in T-bill rates aligns with CBK’s reduction of its base rate from 13 percent in August to 11.25 percent in December, driven by easing inflation and exchange rate pressures. 

According to The Standard, a recent report by the Central Bank of Kenya reveals that high input costs, poor post-harvest handling, and unpredictable weather conditions are key factors contributing to rising food prices in the country. Many farmers are struggling with expensive inputs like fertiliser and seeds, with a significant portion unable to access credit or government subsidies. In some cases, even when subsidised fertiliser is available, farmers face challenges such as transport issues or lack of awareness. The report calls for addressing systemic problems like corruption, poor infrastructure, and excessive reliance on rain-fed agriculture. Experts warn that without urgent action, food prices will continue to rise, deepening poverty in vulnerable communities. 

Kenya’s digital economy is experiencing a significant boost with the expansion of the Business Process Outsourcing (BPO) sector, as reported by The Star. ICT and Digital Economy Principal Secretary John Tanui has emphasised the need to update laws to recognise remote work and outsourcing. This comes as French call centre giant Teleperformance opens a facility at Two Rivers International Finance and Innovation Centre, creating up to 5,000 jobs. The BPO sector, identified as a key pillar under Vision 2030, aims to contribute 10% to Kenya's GDP and create 200,000 jobs, leveraging the nation’s skilled workforce and competitive advantages. The global BPO market, valued at Ksh33.9 trillion, is set for rapid growth, with Kenya positioning itself as a premier outsourcing hub in Africa.

The government has delayed plans to convert M-Pesa paybills into electronic tax registers (ETRs), focusing instead on small businesses and rental income earners, according to The Business Daily. Initially, the government aimed to convert two million digital payment touchpoints into virtual ETRs by December 25, 2024, to curb revenue leakage in Kenya's digital economy. However, the Kenya Revenue Authority (KRA) has decided to take the plan back to the drawing board, with stakeholder consultations underway. KRA has shifted its priority towards improving tax compliance for businesses under the Turnover Tax regime and individuals earning rental income. This move aligns with the goal of reaching the Sh2.92 trillion revenue target for the 2024/25 financial year. 

African nations have agreed on a new 10-year strategy to enhance agricultural development and improve food systems across the continent,in a report by Capital Business. The Comprehensive Africa Agriculture Development Programme (CAADP) action plan aims to increase agri-food output by 45% and reduce post-harvest losses by 50% by 2035. Countries have committed to raising Ksh13.8 trillion ($100 billion) in public and private investments to support this agenda. The strategy also encourages commercial agriculture and value addition to boost economic growth. The new plan was unveiled at the African Union Extraordinary Summit in Kampala, Uganda, with a call for collective efforts from governments, the private sector, and civil society.

In a report by The Business Daily, Kenyan firms are increasingly turning to cryptocurrencies like Tether (USDT) for payments to foreign suppliers amid dollar shortages and a weakening Kenyan shilling, according to a report by the International Monetary Fund (IMF). Stablecoins, digital assets backed by physical currencies such as the US dollar, are being used to hedge against currency depreciation and settle international transactions. An estimated 730,000 Kenyans, primarily under 40 years old, are engaged in cryptocurrency investments, typically transacting amounts below Ksh100,000. Despite a prohibition by the Central Bank of Kenya (CBK) on banks partnering with crypto-related entities, the adoption of cryptocurrencies continues to rise. The Kenya Revenue Authority (KRA) collected Ksh10 billion in crypto-related taxes in 2023, with the market handling Ksh42.4 trillion between 2021 and 2022. The Capital Markets Authority (CMA) and CBK are exploring regulations to manage the sector's growth and mitigate potential risks.