Kenya’s Cabinet Secretary for the National Treasury and Economic Planning John Mbadi, on Wednesday launched the 2025 Medium-Term Debt Management Strategy (MTDS) at the Sarova Panafric Hotel in Nairobi.
The strategy, spanning 2025 to 2028, deploys a series of targeted measures to reduce debt vulnerabilities, minimize costs, and ensure long-term sustainability, signalling Kenya’s proactive stance in a challenging global financial landscape.
The event drew key figures, including Principal Secretary Dr. Chris Kiptoo, Comptroller of the Budget Margaret Nyakang’o, and the Institute of Public Finance (IPF) CEO James Muraguri, alongside financial regulators, development partners, and private sector leaders.
At the heart of the 2025 MTDS is a multi-pronged approach to tackle Kenya’s KSh11 trillion public debt—equivalent to 69 per cent of GDP —which exceeds the sustainable threshold of 55 per cent. Domestic debt stands at KSh5.41 trillion, dominated by Treasury bonds at 85.5 per cent while external debt, largely held by multilateral lenders at 53.9 per cent, totals KSh 5.17 trillion.
With the debt-to-GDP ratio signalling a high risk of distress, the government is deploying strategic measures to bring this down to 52.8 per cent by the 2027/28 financial year. One key strategy is deepening the domestic debt market to reduce reliance on costly external commercial borrowing.
“We will source 75 per cent of our borrowing domestically and only 25 per cent externally, prioritising concessional loans,” Mbadi declared.
By 2027/28, Kenya’s debt mix is projected to adjust to 45 per cent external and 55 per cent domestic, with the debt-to-GDP ratio expected to fall to 57.8 per cent.
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Another critical measure involves reducing Treasury bills to lengthen debt maturities and lower refinancing risks. This approach addresses the high debt service costs—currently at 5.8 per cent of GDP and 60 per cent of total revenue in 2024 and projected to ease to 5.1 per cent in 2025.
The government also plans to explore Liability Management Operations (LMO) to extend debt maturities, further mitigating refinancing pressures and cutting costs. Strengthening the domestic bond market is a parallel priority, ensuring a robust framework for sustainable borrowing.
Fiscal consolidation and export growth form the backbone of Kenya’s strategy to manage its debt burden. These efforts aim to counter challenges like sovereign credit rating downgrades, which have spiked borrowing costs, and global interest rate volatility, which has strained debt servicing.
Kenya’s public debt has ballooned from 40 per cent to 69 per cent of GDP over the past decade, with nearly half in foreign currency, exposing the country to exchange-rate risks. By focusing on export growth, the government seeks to bolster foreign exchange reserves, reducing this vulnerability.
Transparency and governance reforms are also central to the strategy, aimed at restoring investor confidence.
“Partnerships with investors, regulators, and market players are vital,” Mbadi emphasised, noting that these reforms will drive economic stability.
The 2025 MTDS builds on earlier public participation efforts, with the National Treasury having invited contributions from January 27 to 31 in cities like Nyeri, Mombasa, and Machakos.
Wednesday’s launch marks a pivotal moment for Kenya as it navigates a high-risk debt landscape. By anchoring its approach in strategic domestic borrowing, fiscal discipline, and market reforms, Kenya is not only addressing its immediate debt challenges but also setting a foundation for long-term economic resilience in an increasingly uncertain global financial environment.
