Why Treasury Wants to Scrap Off 364-Day T-Bills

In Summary

• High borrowing costs and a strong shilling led to a historic 1.1% dip in private sector lending, despite efforts by CBK to cut interest rates.
• Treasury Proposes End to 364-Day T-Bills to Streamline Debt Management.
• Electricity generation in Kenya declined in November 2024, but KPLC reported increased sales, imports, and exports.
• Kenya is developing a fast payment system to enhance digital finance, promote competition, and supplement M-Pesa.
• KRA missed its revenue target by Ksh163.46 billion in the first half of 2024/25, despite a rise in collections compared to the previous year.
• Donald Trump’s second inauguration heralds a return to a nationalist, right-wing agenda with promises of immediate sweeping reforms.
• A drop in SGR passenger numbers resulted in a Ksh144 million revenue loss, while overall port and rail cargo volumes also declined.

The Business Daily reports that the private sector lending by commercial banks in Kenya dropped by 1.1% in the year to November 2024, marking the first annual contraction since 2002, as high interest rates and a strengthening shilling curtailed credit growth. The Central Bank of Kenya (CBK) reported a dip in outstanding loans from Ksh3.854 trillion to Ksh3.813 trillion, with sectors like manufacturing, trade, and construction seeing reduced borrowing. Despite three consecutive cuts to the Central Bank Rate (CBR), commercial banks have been slow to lower loan interest rates, citing defaults and competition from government securities, prompting CBK to demand fairer lending practices. 

The government is advancing digital finance by working on a fast payment system to supplement M-Pesa’s dominance and enhance the National Payments System. The system, developed through a public-private partnership, will enable seamless interoperability between banks and non-bank providers, improve affordability of financial services, foster innovation, and promote financial inclusion, as reported by The Standard . The initiative is part of the ongoing implementation of the National Payment Strategy (2022-2025) and aligns with global best practices. In the first nine months of 2024, mobile money transactions rose to Ksh6.5 trillion from Ksh5.8 trillion in 2023, highlighting the sector’s growth. 

The National Treasury plans to phase out the one-year Treasury bill as part of reforms to reduce reliance on short-term debt and improve monetary policy transmission.According to The Business Daily, the 2025 Draft Medium Term Debt Strategy highlights that this move aligns with efforts to cut short-term securities' share in domestic debt, which currently stands at 14.34% of total domestic debt (Ksh844.6 billion). The proposal will leave the 91-day and 182-day T-bills as the primary options, while introducing one or two-year Treasury bonds as alternatives for investors. Analysts suggest that this shift will improve price discovery and enhance monetary policy efficiency. 

The government lost Ksh144.2 million in revenue between August and September 2024 as the number of passengers using the Standard Gauge Railway (SGR) dropped from 281,683 to 175,901, reducing revenue from Ksh440.6 million to Ksh296.4 million. According to KNBS, cargo transport volumes via the SGR also declined during this period, though revenue from cargo increased slightly to Ksh1.2 billion. Similarly, passenger numbers and revenue from the Metre Gauge Railway (MGR) dropped, with revenue falling from Ksh13.7 million in August to Ksh12.4 million in September. At the Port of Mombasa, total cargo handled fell from 3.8 million metric tonnes in October to 3.5 million metric tonnes in November 2024, with both export and import volumes declining, as reported by Capital Business. 

The Kenya Revenue Authority (KRA) missed its tax collection target for the first half of the 2024/25 financial year by Ksh163.46 billion, raising Ksh1.07 trillion against the targeted Ksh1.23 trillion, in a report by The Business Daily. The shortfall, partly attributed to the rejection of the contentious Finance Bill, 2024, comes despite a Ksh23.15 billion increase in collections compared to the same period in 2023. The Parliamentary Budget Office (PBO) has urged the government to focus on enhancing tax administration rather than introducing new levies, which could burden taxpayers. Meanwhile, development spending surged by 84.4% to Ksh129.82 billion, and pension payouts rose 44% to Ksh82.8 billion during the period. 

Donald Trump took the oath of office as the 47th president of the United States, marking his historic return to power. The ceremony featured a smaller crowd and included global figures such as Elon Musk, who supported Trump’s campaign. Citizen TV reports that Trump pledged sweeping changes, including immigration crackdowns, executive orders to undo his predecessor’s policies, and the elimination of federal diversity programs. This marks the first time since Grover Cleveland that a U.S. president has returned to office after losing re-election, making history as the oldest president to be sworn in.

Kenya's electricity generation dropped by 3.3 percent in November 2024, falling from 1,103.5 million kWh in October to 1,067.3 million kWh, while total generation and imports decreased from 1,233.6 million kWh to 1,201.0 million kWh during the same period. Capital Business reports that despite the decline in local generation, KPLC recorded higher electricity sales, rising from 934.5 million kWh in October to 937.7 million kWh in November, alongside a slight increase in imports from 130.1 million kWh to 133.7 million kWh and exports from 3.1 million kWh to 3.4 million kWh.