In the week leading to September 25, the Kenyan government printed a total of Ksh15 billion to ease pressure on the National Treasury in financing an enormous budget.
According to data by the Central Bank of Kenya (CBK), it gave the government an overdraft of KSh45 billion by September 25.
CBK said that this was Kenya’s largest overdraft in a week which exerted a lot of pressure on the Treasury to make interest payments.
Printing money according to the Standard is “crediting money into the government’s coffers, in what is technically referred to as printing money”.
The danger of printing money is that it drives inflation higher as prices of products increases. Goods and services reduce but money is in plenty which only means that more case circulates but does not necessarily bolster the economic output.
The Ukur Yattani led Treasury resulted in domestic borrowing as a result of COVID-19 pandemic.
Before this overdraft facility, several people had asked the government to print more money to cushion the economy from the aftereffects of the pandemic.
However, this call was swept under the carpet and the government went ahead to clear its overdrafts by July, CBK data shows.
“Section 46(3) of the Central Bank of Kenya Act sets the limit of the government of Kenya’s overdraft facility at the Bank at five per cent of the Gross Recurrent Revenue as reported in the latest Government of Kenya audited financial statements,” said CBK in its financial report.
“The limit for the year ending June 30, 2020, is Sh68.5 billion, while in the previous financial year it was Sh65.7 billion based on the gross recurrent revenue for the year ended 30 June 2018, which are the latest audited financial statements at the date of approval of these financial statements.”
The CBK charges a 7% interest on the overdraft.
In the 90s when the late Daniel Moi was President, inflation went high due to uncontrolled printing of money, a mistake the Jubilee regime would not want to repeat.