Kenya has launched the 2025 Medium-Term Debt Strategy to enhance public debt management by minimizing costs, reducing risks, and ensuring sustainability. The strategy targets a lessening of Treasury bills, a focus on domestic markets, and a balanced borrowing approach. Current public debt stands at Sh11.02 trillion, and the strategy aims for significant debt reductions by 2028.
The Kenyan government has introduced its 2025 Medium-Term Debt Strategy (MTDS), aiming to optimize public debt management by minimizing costs and risks, while ensuring sustainability through 2028. National Treasury and Economic Planning Cabinet Secretary Dr. John Mbadi emphasized the importance of diligent debt management in the face of economic uncertainties and shifting global fiscal climates.
The MTDS aims to systematically decrease the stock of Treasury bills and extend the maturity of public debt instruments. It will also focus on expanding the domestic debt market and achieving a balanced approach to concessional and commercial external financing, as highlighted by CS Mbadi during the strategy’s launch in Nairobi.
As of March 2025, Kenya’s total public debt is reported at Sh11.02 trillion, an increase from Sh10.5 trillion in June 2024, equating to approximately 65.7 percent of the nation’s Gross Domestic Product (GDP). The breakdown reveals Sh5.9 trillion is domestic debt while Sh5.09 trillion is external debt, demonstrating the growing financial obligations faced by the government.
Notably, multilateral lenders, including the World Bank, make up 53.9 percent of external debt, while bilateral and commercial lenders follow at 21.4 percent and 24.7 percent, respectively. Additionally, government-guaranteed borrowing for state corporations totals Sh100 billion, indicating significant liabilities attributed to parastatals such as Kenya Airways and Kenya Ports Authority.
CS Mbadi emphasized the necessity for a diverse public debt structure to manage exchange rate risks, noting fluctuations have adjusted the external debt stock from Sh6 trillion in January 2024 to Sh5 trillion today. He expressed concerns about the present value of public debt, which exceeds the legal threshold at 63 percent of GDP, indicating a requirement to realign this figure within the mandated limit by November 2029.
To achieve this, the MTDS targets a borrowing distribution of 25 percent from external sources and 75 percent from domestic markets. The government seeks to decrease the debt-to-GDP ratio from 63.7 percent to 57.8 percent and the present value debt-to-GDP from 58.1 percent to 52.8 percent by 2028, relying on a structured annual borrowing plan and biannual performance assessments to ensure effective execution.
In light of the rising challenges in public debt management, such as credit rating downgrades that inflate borrowing costs, the National Treasury is set to prioritize domestic debt market enhancements. Dr. Kiptoo conveyed that achieving a balanced budget, where revenue meets expenditures, is essential and noted Kenya’s historical struggles with maintaining budgetary balance.
James Muraguri, the Chief Executive Officer of the Institute of Public Finance, emphasized the need for civic engagement in debt policy discussions, calling for active participation in shaping these strategies. The 2025 MTDS presents a strategic framework for navigating Kenya’s debt landscape and ensuring economic resilience.
In summary, the 2025 Medium-Term Debt Strategy seeks to enhance public debt management in Kenya through targeted measures aimed at reducing costs, mitigating risks, and improving domestic market participation. The government recognizes key challenges such as rising interest rates and a need for fiscal balance in addressing borrowing needs. The successful implementation of this strategy hinges on disciplined execution and constructive engagement from various stakeholders.
Original Source: www.kenyanews.go.ke
