The Kenyan government launched the 2025 Medium-Term Debt Strategy to manage public debt cost-effectively and sustainably. Key elements include reducing Treasury bills, extending debt maturity, and increasing domestic market participation. The strategy targets a 25% external borrowing mix and aims to decrease the debt-to-GDP ratio while addressing challenges such as increased borrowing costs and economic volatility.
The Kenyan government has introduced the 2025 Medium-Term Debt Strategy (MTDS), which focuses on controlling public debt costs and risks, ensuring sustainability over the next three years. This initiative was presented by Cabinet Secretary (CS) for National Treasury and Economic Planning, John Mbadi, in Nairobi, indicating the importance of prudent debt management in light of current economic uncertainties and global financial dynamics.
The MTDS aims to decrease the stock of Treasury bills and extend the maturity of public debt instruments from 2025 to 2028. Key objectives include enhancing the domestic debt market and balancing concessional and commercial external financing options, thereby better managing Kenya’s overall public debt.
As of March 2025, Kenya’s public debt reached Sh11.02 trillion, up from Sh10.5 trillion in June 2024, representing 65.7% of the nation’s GDP. This consists of Sh5.9 trillion domestic debt and Sh5.09 trillion external debt, as detailed by CS Mbadi. Notably, multilateral lenders alone represent 53.9% of external debt, with bilateral and commercial lenders holding 21.4% and 24.7%, respectively.
Regarding government-guaranteed debts for state corporations like Kenya Ports Authority, the amount stands at Sh100 billion, underlining the necessity for a diversified public debt structure to manage exchange rate risks. Mbadi mentioned that fluctuations, rather than repayments, have contributed to changes in external debt stock figures.
The present value of public debt currently sits at 63% of GDP, above the legal limit of 55%, necessitating corrective measures before November 2029. The MTDS aims for a borrowing strategy of 25% from external sources and 75% from domestic markets, with goals of reducing the debt-to-GDP ratio from 63.7% to 57.8% by 2028.
Implementation will involve an annual borrowing plan and semi-annual evaluations of cost and risk assessments. Furthermore, the CS discussed issues such as credit rating downgrades causing increased borrowing costs and difficulties from global financial volatility and rising interest rates, complicating debt management.
CS Mbadi anticipates that improved macroeconomic conditions will lead to reduced interest rates over time. In light of decreased external financing, the Treasury aims to strengthen the domestic debt market through medium-to-long-term securities while enhancing export capabilities and foreign reserves to promote external debt sustainability.
National Treasury Principal Secretary, Dr. Chris Kiptoo, emphasized the importance of maintaining a balanced budget to reduce borrowing needs. He highlighted that Kenya historically struggles to achieve this balance, indicating ongoing discussions involving revenue enhancement and expenditure control.
James Muraguri, CEO of the Institute of Public Finance (IPF), encouraged public involvement in debt policy discussions, emphasizing that strategy formulation should reflect public concerns. The 2025 MTDS provides a structured approach to managing national debt while promoting economic stability, with its effectiveness reliant on disciplined execution, market engagement, and positive economic conditions as Kenya navigates its financial future.
The introduction of the 2025 Medium-Term Debt Strategy by the Kenyan government represents a strategic initiative aimed at managing public debt effectively. It focuses on cost reduction, risk minimization, and strengthening the domestic debt market. With effective implementation and public engagement, the strategy seeks to foster economic stability and address Kenya’s debt challenges sustainably by refining borrowing practices and enhancing fiscal management.
Original Source: www.kenyanews.go.ke
