The government continued hogging credit from financial institutions even as loans to the private sector shrunk at the beginning of the year.

Credit to the state increased by 31.9 percent while credit to the economic boosting sectors of the economy grew by only 1.8 percent.

According to CBK data credit to government stood at Sh771 billion in January from 585.1 billion last year January.

In January 2017 credit to the private sector was at 2.2 trillion and that has grown to 2.3 trillion by the end of January this year.

Credit to agriculture continues shrinking posting a 7.9 percent decline while loans to the transport sector declined by 8. 4 percent. Business loans also reduced by 8.4 percent while mining and quarrying were down 7.4 percent.

On the other hand, credit to county governments was up 4 percent to Sh4.2 billion while loans to parastatals rose 7.1 percent to Sh110 billion.

This trend underscores the concerns by Bretton Woods institution such as World Bank and the IMF that the growth in the gap between what Kenya spends and what it can raise in taxes is crippling the economy especially when the state borrows from the domestic market.

Banks prefer lending to the state than riskier borrowers and this has increased under the rate cap regime as they seek to tame runaway non-performing loans which at Sh259 billion are at record levels.

CBK said that during the week ending May 4, 2018, the government securities market continued the good performance witnessed in the recent months.

The Treasury bills auction of May 3, 2018 received bids totaling Sh32.8 billion against an advertised amount of Sh24.0 billion, giving a subscription rate of 136.83 percent.

All the three instruments offered were oversubscribed, with the 364-day Treasury bill getting the highest subscription rate of 155.07 percent.