Kenya's domestic debt has increased by 1.2 billion US dollars in the past seven months, data from Kenya's central bank showed.

The East African nation's domestic debt jumped from 9.9 billion dollars in June last year to 11.1 billion dollars as the east African nation continued to borrow more locally, new data from Central Bank of Kenya (CBK) indicated on Monday in a weekly report.

The sharp rise in domestic debt is attributed to increases in Treasury bills, bonds and government overdraft at CBK. During the period, Treasury bills increased by 689 million dollars, Treasury bonds by 309 million dollars and government overdraft by 208 million dollars.

"Other domestic debt, which includes clearing items in transit, advances from commercial banks, pre-1997 government overdraft and tax reserve certificates increased by 4.59 million during the period," said CBK.

In June last year, the value of Treasury bills stood at 1.52 billion dollars and Treasury bonds at 7.9 billion dollars. At the start of January, the value of Treasury bills jumped to 2.35 billion dollars and bonds to 8.2 billion dollars.

Kenya's domestic debt is mainly held in the two government securities. The securities accounted for 94 percent of gross domestic debt as at Feb. 8, said CBK.

Most of the debt is held in Treasury bonds at 74 percent while Treasury bills account for 19.9 percent. Government overdraft takes the share of 2.6 percent while the rest, 3.4 percent, is made up of advances from commercial banks, pre-1997 government overdraft and tax reserve certificates.

Commercial banks in the east African nation lead in holding of the domestic, followed by insurance companies and pension fund organizations.

The rise in domestic debt increases burden on Kenya's government, which has to pay hefty interests and other charges.

The East African nation is spending over 200 million dollars more on interest payments on domestic debt than it used to a year ago. From July 1, 2012, to Feb. 8, interest on domestic debt stood at 709 million dollars, compared with 501 million dollars during the same period in the financial year 2011/2012.

"The cost during the period was on account of interest and other charges on Treasury bills and Treasury bonds amounting to 161 million dollars and 514 million dollars respectively. In addition, interest on government overdraft and the pre-1997 government overdraft amounted to 21 million dollars and 14 million dollars respectively," said CBK.

Weighted average interest rate on the indicative 91-day Treasury bills currently stands at 8.21 percent and 182-day bills at 8.5 percent.

Investors are warming up to the papers, especially the 182-day Treasury bill, whose yields increased by 5.2 percent in the previous auction dated Feb. 18.

Kenya's total public debt currently stands at 19.5 billion dollars.

Analysts, led by International Monetary Fund (IMF), have raised alarm over the fast-growing public debt, which the institution warned is impeding economic development. IMF noted the debt can be decreased by eliminating waste, prudent spending and mobilizing of taxes to further growth.

As at June last year, the East African nation's public debt was about 48 percent of the Gross Domestic Product (GDP), according to Ministry of Finance. The debt currently nears the 50 percent mark, which is considered unsustainable.

Kenya National Bureau of Statistics indicated GDP in the period 2010/2011 stood at 34.1 billion dollars.

While domestic debt is a result of intensified sale of government securities, Kenya's external debt, noted the Ministry of Finance, is because of increased disbursements of loans from creditors and fluctuation of the shilling against world major currencies.

The local unit is currently exchanging at an average of 87 shillings against one US dollar, having weakened from 86 in last December.