The Kenyan government has launched the 2025 Medium-Term Debt Strategy (MTDS), outlining measures aimed at minimizing the cost and risks of public debt while ensuring sustainability over the next three years.
Speaking during the unveiling in Nairobi, the National Treasury and Economic Planning Cabinet Secretary (CS), John Mbadi, emphasized the need for prudent debt management amid economic uncertainties and shifting global financial dynamics.
According to the CS, the strategy, covering the period from 2025 to 2028, seeks to gradually reduce the stock of Treasury bills while lengthening the maturity of public debt instruments. It also prioritizes deepening the domestic debt market and securing a balanced mix of concessional and commercial external financing.
CS Mbadi revealed that as of March 2025, Kenya’s total public debt stood at sh11.02 trillion, an increase from sh10.5 trillion in June 2024.
“This represents 65.7 percent of the country’s gross domestic product (GDP). Of this, sh5.9 trillion is domestic debt, while sh5.09 trillion is external debt,” noted Mbadi.
The CS further highlighted that multilateral lenders, including the World Bank, account for 53.9 percent of the external debt, while bilateral and commercial lenders hold 21.4 percent and 24.7 percent, respectively.
He added that government-guaranteed debt for state corporations such as the Kenya Ports Authority (KPA), Kenya Electricity Generating Company (KenGen), and Kenya Airways stands at Sh100 billion.
“The strategy recognizes that a diversified public debt structure and a deepening of the domestic debt market are necessary to mitigate exchange rate risks. For instance, by January 2024, our external debt stock was sh6 trillion, but today it is sh5 trillion, not because we have repaid loans, but due to exchange rate fluctuations,” Mbadi explained.
The CS disclosed that the present value of public debt stands at 63 percent of GDP, exceeding the legal threshold of 55 percent stating that the government has until November 2029 to bring this ratio within the required limit.
To address this, he said that the 2025 MTDS targets a borrowing mix of 25 percent from external sources and 75 percent from domestic markets, with the plan aiming to reduce the debt-to-GDP ratio from 63.7 percent to 57.8 percent and lower the present value of debt to GDP from 58.1 percent to 52.8 percent by 2028.
“The government will implement the strategy through an annual borrowing plan, with cost and risk assessments conducted semi-annually to evaluate performance and make necessary adjustments,” announced Mbadi.
Further, the CS acknowledged challenges in Kenya’s public debt landscape, including sovereign credit rating downgrades, that have led to higher borrowing costs and reduced investor confidence.
Other challenges include global financial market volatility and rising interest rates which have also made debt management more complex.
“The high-interest rate environment has led to increased debt servicing costs. However, as macroeconomic conditions improve, we expect an easing of monetary policy, which should help lower interest rates,” he implored.
In response to shrinking external financing, the CS hinted that the Treasury plans to focus on strengthening the domestic debt market through medium-to-long-term debt securities and policy reforms, while also aiming to boost exports and foreign exchange reserves to enhance external debt sustainability.
Echoing the CS’s remarks, the National Treasury Principal Secretary (PS), Dr. Chris Kiptoo, posited that if the country balances its budget, where revenues actually meet all the expenditure needs, then Kenya does not need to borrow.
“When we look at the history of Kenya, we have not been in that space where we have had a balanced budget,” observed the PS, further revealing that they are in the space of discussing on the revenue side, how much to raise revenues while also containing expenditures.
In his remarks, Institute of Public Finance (IPF) Chief Executive Officer, James Muraguri urged Kenyans to not only be informed about debt policies but also actively engage in shaping them adding that debt strategies reflect the voices and concerns of the people.
The 2025 Medium-Term Debt Strategy lays out a clear roadmap for managing Kenya’s debt while ensuring economic stability.
With a focus on reducing costs, minimizing risks, and enhancing domestic market participation, the Treasury aims to navigate the country’s debt challenges and foster long-term financial sustainability.
As Kenya moves forward, the success of the strategy will depend on disciplined implementation, continuous market engagement, and a favourable economic environment.
By Emmanuel Mbuthia
