The government has expressed its commitment to ensure transparency and sound financial governance by engaging the citizens in understanding public debt, its composition and the need to borrow.
Following the first ever public participation on the Medium-term Debt Management Strategy (MTDS), the National Treasury said that the feedback received from the public is very key and will be taken into consideration when finalizing the draft 2025 MTDS.
According to the National Treasury as at end of June 2024, public debt stock was Ksh 10.58 trillion which is equivalent to 65.7pc of the country’s Gross Domestic Product. Of the total debt stock, external debt amounted to Ksh 5.2 trillion with the balance being from domestic creditors.
In the domestic market front, the government issues a range of debt instruments including Treasury bills (T-bills) and Treasury bonds (T-bond) ranging from two years to thirty years, and a benchmark bond programme issuance that is implemented in line with the medium-term debt management strategy.
During the public participation held in Mombasa County, National Treasury Director of Debt Recording and Settlement (DRSD) Jeremiah Tomno said the country’s public debt is currently assessed as sustainable but with a high risk of debt distress.
He noted that the MTDS guides in developing strategies that ensure debt remains within sustainable levels.
MTDS is prepared in accordance with Section 33 of the Public Finance Management Act (PFMA) 2012 and plays an important role in the country’s fiscal health.
However, he added that there is a shortfall in the budget which the government normally finances through debt.
He said MTDS is a strategy that gives the ways on how the nation can raise funds at a cheaper price and at a cheaper rate if it borrows externally.
“Whatever we borrow, we use it for development. Members of the public should be able to view and see what this debt has done in the community in terms of development,” he said.
He added that MTDS being a mid-term policy, will go for one to three years, and it is meant to finance the short fall externally and locally, as it’s the document that will prescribe how the government is going to borrow.
He noted that the strategy proposes a borrowing mix of 25pc external and 75pc domestic in gross terms to meet the funding gap at minimal costs and prudent degree of risks.
“The debt situation is not very good but there are policies and mechanisms on how to improve it. The ratings changed from negative to positive just recently, this is very good for Kenya since when we are going to borrow the rates will also change,” said Tomno.
He said financing the budget there is a debt taken that the country must pay the interests and the redemption.
“Currently it’s quite high as it is around Ksh 1.9 trillion. If we don’t have funds to pay the maturing debts, then we must borrow and pay,” he added.
Senior deputy Director debt Policy strategy and Risk Management (DPSRM) Simon Mungai said that the medium-term debt management strategy (MTDS) is prepared at the backdrop of heightened public awareness on public debt and is prepared annually to guide to guide the government in making informed decisions regarding public borrowing and effective public debt management.
Mungai said that the main objective of developing MTDS is to ensure the government’ financing needs (budget deficit as reflected in Budget Policy Statement) and payment obligations are met at the lowest cost possible with a prudent degree of risk.
“We don’t borrow without a plan, but we borrow because there is a gap between revenue and expenditure since our development needs as a country are more than what we are getting as revenue, and we cannot over tax the citizens. To finance the deficit, we must borrow. The government is keen on borrowing at the lowest risk and cost so that the future generation is not burdened,” said Mungai.
He said it is a constitutional requirement that the government must tell the public what public debt is, its composition and what it does with the money.
