CS Mbadi Faces Demands to Lower Kenya’s Debt-to-GDP Ratio by 2029

Treasury Secretary John Mbadi must reduce Kenya’s debt-to-GDP ratio to 55% by 2029, as directed by COB Margaret Nyakango. Current debt levels are declining, but remain above IMF recommendations. Challenges include managing high refinancing risks and implementing effective debt management strategies.

Treasury Cabinet Secretary John Mbadi has been urged by Controller of Budget (COB) Margaret Nyakango to lower Kenya’s Gross Domestic Product (GDP) debt ratio to 55% by 2029. This directive follows a review of the 2025 Medium-Term Debt Management Strategy, wherein the COB called for a comprehensive roadmap to achieve this critical threshold.

Nyakango reported a decline in Kenya’s total nominal public debt, dropping from 71.9% in 2022 to 65.7% by June 2024. The 2025 Budget Policy Statement forecasts a further decrease to 52.5% by 2029. However, this current debt-to-GDP ratio exceeds the International Monetary Fund’s recommended maximum of 50% for developing nations.

The COB emphasized the necessity for a favorable debt profile, noting that the National Treasury must implement effective debt management strategies and reforms in revenue collection to avert more severe financial instability. Furthermore, as of December 2024, Kenya’s total public debt reached Sh10.93 trillion, split between Sh5.06 trillion owed to external lenders and Sh5.87 trillion to domestic lenders.

In the first half of the fiscal year 2024/2025, debt expenditure totaled Ksh 666.34 billion, a rise from Ksh 597.58 billion during the equivalent period in FY 2023/2024. This increase is primarily attributed to the repayment of domestic debts related to treasury bills and bonds, which accounted for Ksh 432.83 billion.

Margaret Nyakango advocated for parliamentary oversight, requesting that the National Treasury detail the measures undertaken in FY 2024/25 to reduce short-term debt and alleviate the high refinancing risks. She clarified that the Treasury has a limited timeframe for repaying its debts, facing higher interest rates due to these constraints.

Additionally, Nyakango urged the Resource Mobilization Department at the National Treasury to clarify the initiatives being adopted to improve interest rates and extend grace periods for repayments.

In summary, the Kenyan government faces critical pressure to reduce its debt-to-GDP ratio to a sustainable level by 2029. The COB has outlined essential strategies and reforms needed to achieve this goal, highlighting the urgency for better debt management and revenue enhancement mechanisms. The observed trends in public debt and expenditure underscore the challenges ahead in maintaining fiscal stability.

Original Source: www.kenyans.co.ke