Kenya has launched the 2025 Medium-Term Debt Strategy (MTDS) aimed at minimizing public debt costs and risks while ensuring sustainability until 2028. The strategy focuses on reducing Treasury bills, lengthening debt maturities, and enhancing the domestic debt market. As of March 2025, public debt amounted to KSh 11.02 trillion, exceeding legal thresholds. Key goals include lowering the debt-to-GDP ratio and successful implementation contingent on disciplined management and market engagement.
The Kenyan government has introduced the 2025 Medium-Term Debt Strategy (MTDS) to enhance public debt management while minimizing costs and risks associated with public debt. National Treasury and Economic Planning Cabinet Secretary, John Mbadi, highlighted the importance of prudent debt management in the face of economic uncertainties and fluctuating global financial conditions.
The MTDS, effective from 2025 to 2028, aims to gradually lower Treasury bills and extend the maturity of public debt instruments. It also emphasizes the need to strengthen the domestic debt market, along with achieving a balanced mix between concessional and commercial external financing.
As of March 2025, Kenya’s public debt reached KSh 11.02 trillion, growing from KSh 10.5 trillion in June 2024. This amount corresponds to 65.7 percent of the gross domestic product (GDP), with KSh 5.9 trillion classified as domestic debt and KSh 5.09 trillion as external debt. Multilateral lenders, chiefly the World Bank, account for a significant portion of this external debt.
Additionally, the total government-guaranteed debt for various state corporations amounts to KSh 100 billion. According to Mbadi, a diversified debt structure and a more vibrant domestic debt market will help mitigate exchange rate risks.
The current public debt is reported to be 63 percent of GDP, surpassing the legal limit of 55 percent. To remedy this, the MTDS aims to adjust the borrowing strategy to 25 percent external and 75 percent domestic, targeting a reduction of debt-to-GDP and present value ratios by 2028.
Implementation of the MTDS will be guided by an annual borrowing plan, along with semi-annual cost and risk evaluations to assess progress. The CS cited several obstacles, including credit rating downgrades and market volatility, resulting in increased borrowing costs and diminished investor confidence.
Rising interest rates have amplified debt servicing burdens; however, improvements in macroeconomic conditions may lead to lower rates in the near future. The Treasury seeks to fortify the domestic debt market by focusing on medium-to-long-term securities and policy initiatives.
Dr. Chris Kiptoo, Principal Secretary of the National Treasury, remarked that achieving a balanced budget could reduce the need for borrowing, a practice Kenya has not achieved consistently. He emphasized discussions around enhancing revenue generation and controlling expenditures.
James Muraguri, CEO of the Institute of Public Finance, encouraged public involvement in debt policy formulation, asserting that debt strategies should reflect public opinion. The 2025 MTDS delineates a structured path to manage Kenya’s debt while promoting economic stability, relying on disciplined execution and proactive market engagement.
In conclusion, the Kenyan government’s 2025 Medium-Term Debt Strategy establishes a framework aimed at prudent debt management and economic sustainability. By focusing on reducing costs, managing risks effectively, and strengthening the domestic debt market, the strategy seeks to address current public finance challenges while promoting economic stability well into the future. The successful implementation will depend on active involvement from stakeholders and favorable macroeconomic conditions.
Original Source: www.kenyanews.go.ke
