The Kenyan government launched the 2025 Medium-Term Debt Strategy (MTDS) to manage public debt effectively by minimizing costs and risks while ensuring sustainability over the next three years. The strategy aims to adjust the structure of debt and enhance market participation to navigate economic challenges. Key targets include reducing the debt-to-GDP ratio and engaging the public in policy formulation.
The Kenyan government has introduced the 2025 Medium-Term Debt Strategy (MTDS), which aims to effectively manage public debt by mitigating costs and risks while promoting sustainability over the next three years. National Treasury and Economic Planning Cabinet Secretary, John Mbadi, underscored the importance of prudent debt management amid fluctuating global economic conditions during the announcement in Nairobi.
The strategy, spanning 2025 to 2028, proposes to gradually decrease the volume of Treasury bills and extend the maturities of public debt instruments. It also aims to enhance the domestic debt market and balance the combination of concessional and commercial external financing.
As of March 2025, the total public debt of Kenya rose to sh11.02 trillion from sh10.5 trillion in June 2024, constituting 65.7% of the nation’s Gross Domestic Product (GDP). According to CS Mbadi, domestic debt comprises sh5.9 trillion and external debt amounts to sh5.09 trillion.
Multilateral lenders account for 53.9% of external debt, while bilateral and commercial creditors contribute 21.4% and 24.7%, respectively. Additionally, debt guaranteed by the government for various state entities, such as Kenya Ports Authority and Kenya Airways, totals Sh100 billion
CS Mbadi pointed out that a varied public debt structure and an expanded domestic debt market are crucial for reducing exchange rate risks. He noted fluctuations in the external debt from sh6 trillion in January 2024 to sh5 trillion presently, attributing this decline to exchange rate changes rather than debt repayments.
The current value of public debt stands at 63% of GDP, surpassing the legal limit of 55%. The administration is tasked with bringing this ratio within regulatory frameworks by November 2029. The 2025 MTDS seeks to achieve a target borrowing mix of 25% from external sources and 75% from domestic markets, consequently aiming to reduce the debt-to-GDP ratio from 63.7% to 57.8% by 2028.
CS Mbadi announced that the strategy entails an annual borrowing plan, with performance evaluations and necessary adjustments happening semi-annually. He also acknowledged various obstacles in public debt management, including sovereign credit rating downgrades and rising interest rates which intensify debt servicing costs and undermine investor confidence.
Amid these challenges, he expressed optimism that, as economic conditions improve, monetary policy will ease, resulting in lower interest rates. To counteract the decline in external financing, strategies to reinforce domestic debt through medium-to-long-term securities and necessary policy reforms are proposed.
National Treasury Principal Secretary, Dr. Chris Kiptoo, remarked on the necessity of achieving a balanced budget to mitigate borrowing. He indicated that the focus lies in increasing revenue while managing expenditures effectively.
James Muraguri, Chief Executive Officer of the Institute of Public Finance, emphasized that public involvement in debt policy is vital, highlighting that these strategies must incorporate the public’s concerns and opinions.
The 2025 Medium-Term Debt Strategy establishes a framework for managing Kenya’s debt responsibly while fostering economic stability. By concentrating on cost reduction, risk minimization, and increasing participation in the domestic market, the Treasury aims to address the nation’s debt issues and ensure long-term financial health. The execution of this strategy will hinge on disciplined implementation, ongoing market communication, and a supportive economic context.
In summary, the 2025 Medium-Term Debt Strategy aims at prudent public debt management in Kenya, focusing on reducing costs, minimizing risks, and ensuring sustainability. Significant efforts will be directed towards balancing external and domestic financing and addressing existing challenges. Successful implementation of this strategy is vital for achieving long-term economic stability and enhancing investor confidence. The engagement of the public in shaping debt policies is also crucial in this endeavor.
Original Source: www.kenyanews.go.ke
