As Kenya works to bring the national debt to acceptable levels, the Public Debt Management Office is exploring opportunities for diversifying sources of external borrowing in particular targeting Diaspora Bond, and Environmental, Social and Governance (ESG) debt instruments.
- Among the challenges Treasury has identified in its quest to reduce national debt to acceptable standards is limited understanding among major stakeholders, slow legal reforms, and the high stock of maturing Treasury Bills.
- In Q3 last year, at least three global credit ratings agencies lowered Kenya’s Credit ratings, mainly citing the withdrawal of the controversial Finance Bill 2024 after deadly protests, holding that it will slow the country’s fiscal consolidation.
- In debt management, Treasury lists challenges such as tight budget provisions precipitating cash constraints leading to borrowing proceeds being a major budget funding source.
“Measures aimed at addressing public debt vulnerabilities including liability management operations, prioritizing concessional borrowing and continuation of fiscal consolidation path will be pursued in the short and over medium term,” Treasury CS Mbadi says in the draft 2025 Medium Term Debt Strategy. “These measures are broadly aimed at fostering public debt sustainability by reducing the pace of public debt accumulation.”
Public and publicly guaranteed debt stock increased to Ksh. 10,581.98 billion as of the end of June 2024 from Ksh. 10,278.88 billion as of the end of June 2023. This comprises an external debt stock of Ksh. 5,171.70 billion and a domestic debt stock of Ksh. 5,410.28 billion.
Domestic debt with a maturity of 4 to 10 years improved as at end June 2024 while he proportion of instruments with less than one year to maturity increased to 18.6 percent as at end June 2024 from 16.7 percent as at end June 2023.
Diaspora bonds are debt instruments issued to expatriates, often to finance infrastructure projects or provide much-needed crisis relief. In 2024, several senior government officials mentioned that the state would likely aim at raising upto KShs. 500bn from such a bond issued to the more than 4 million Kenyans living abroad. The move is part of a program in Vision 2030’s program to increase diaspora remittances, now Kenya’s largest source of foreign inflows, to KSh 1 trillion in 2027.
The October 2024 Debt Sustainability Analysis reports Kenya’s public debt to be sustainable but with a high risk of debt distress. The present value of public debt was 63.0 percent of GDP against the benchmark debt threshold of 55 percent of debt to GDP. The National Treasury has until 1st November 2028 to bring the present value of public debt to within the threshold.
