MPs approve 2025 Debt Management Strategy amid concerns over public borrowing
The approval comes barely three days after The Controller of Budget, Margaret Nyakang'o, challenged the Treasury to reduce the country's Gross Domestic Product (GDP) debt ratio to 55% by 2029.
The National Assembly has approved the 2025 Medium-Term Debt Management Strategy after delaying it for two weeks due to delays in reconstituting the Budget and Appropriations Committee.
The delay came as Members of Parliament sought to ensure thorough scrutiny of the Debt Management Strategy, which plays a crucial role in shaping the country's fiscal policy.
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"The budget-making process is one of the key critical functions of this House. It requires the complete active participation of all the Members of this House," said Majority Party Whip Sylvanus Osoro during the debate that authorized the 14-day postponement on February 20, 2025.
The approval comes barely three days after The Controller of Budget, Margaret Nyakang'o, challenged the Treasury to reduce the country's Gross Domestic Product (GDP) debt ratio to 55% by 2029.
Nyakang'o stated that while the ratio had declined from 71.9% in 2022 to 65.7% by June 2024, achieving the targeted threshold required a robust debt management framework.
"Kenya's debt-to-GDP ratio is still notably higher than the International Monetary Fund's recommended threshold of 50% for developing countries," noted Nyakang'o
On their part, the Treasury remains optimistic that the 2025 Medium-Term Debt Management Strategy will bring Kenya's debt-to-GDP ratio down to 52.5% by 2029.
As such, the strategy focuses on lowering refinancing risks by extending the maturity profile of public debt, shifting towards concessional borrowing, and strengthening domestic debt markets.
Moreover, the Treasury aims to decrease short-term domestic debt reliance by gradually reducing the stock of Treasury bills while increasing the issuance of longer-term debt instruments.
The strategy also prioritizes concessional borrowing to minimize the cost of debt servicing, which has been rising due to high domestic interest rates.
A key challenge highlighted in the strategy is the country's high debt servicing costs. In the first half of the 2024/25 financial year, Kenya spent Sh666.34 billion on public debt servicing, a significant increase from Sh597.58 billion in the same period of the previous year.
Some MPs have thus recently voiced concerns about the country's ability to meet these targets given the current economic challenges.
"We must ensure that our debt management measures are not just ambitious on paper but are backed by clear, actionable plans that guarantee fiscal discipline and economic stability," said former Budget and Appropriations Committee Chair and Kiharu Representative Ndindi Nyoro.
The implementation of the strategy will be closely monitored through quarterly reviews, with the National Treasury required to report progress on key debt indicators, including the proportion of concessional borrowing, the average maturity of public debt, and the impact of liability management operations.
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