The National Treasury of Kenya has launched its first-ever public participation forum on the Medium-term Debt Management Strategy (MTDS), signaling a strong commitment to ensuring transparency and sound financial governance in the country. The initiative aims to engage citizens in understanding the composition of the public debt, its purpose, and the strategies employed in borrowing. The insights garnered from the public will be instrumental in shaping the final version of the 2025 MTDS.
As of June 2024, Kenya’s public debt stands at Ksh 10.58 trillion, representing 65.7% of the nation’s Gross Domestic Product (GDP). Of this total debt stock, Ksh 5.2 trillion is external debt, with the remaining portion owed to domestic creditors. To meet its financial needs, the government utilizes various debt instruments, such as Treasury bills (T-bills) and Treasury bonds (T-bonds), with maturity periods ranging from two to thirty years. These instruments are issued as part of the government’s broader strategy to manage and finance the fiscal deficit.
Jeremiah Tomno, Director of Debt Recording and Settlement at the National Treasury, explained that while Kenya’s public debt is currently considered sustainable, there remains a high risk of debt distress. The MTDS plays a crucial role in keeping debt within manageable levels by providing a framework to guide borrowing decisions and ensure the country does not exceed its fiscal limits. The strategy also seeks to manage the cost of borrowing, balancing external and domestic debt at a ratio of 25% external to 75% domestic.
Tomno emphasized that the funds raised through debt issuance are allocated for development projects that directly benefit communities. He urged the public to closely monitor these investments to ensure they yield tangible benefits. The MTDS, designed for one to three years, serves as the government’s primary policy tool for borrowing, outlining strategies to meet funding gaps at the lowest cost and minimal risk.
Despite the growing debt burden, the National Treasury has been proactive in its efforts to manage and reduce risks. Recently, Kenya’s debt ratings were upgraded from negative to positive, reflecting improved fiscal management. This rating improvement is expected to result in more favorable borrowing rates, making it cheaper for the government to raise funds in the future.
The government’s approach to debt financing aligns with constitutional requirements to be transparent about public borrowing. As Kenya seeks to balance its development needs with available revenue, borrowing remains a necessary tool, but with a commitment to ensuring that future generations are not burdened by unsustainable debt levels. Through public participation and sound strategy, Kenya is striving to achieve a healthy fiscal outlook while meeting its development objectives.
