Nairobi — Controller of Budget (COB) Margaret Nyakango has urged the National Treasury to lower the country's debt-to-GDP ratio to 55 percent by 2029.
The recommendation comes as part of efforts to address ongoing concerns regarding the sustainability of the nation's public debt.
According to the Controller of Budget, Kenya's total nominal public debt as a percentage of GDP has been steadily declining, from 71.9 percent in 2022 to 65.7 percent in June 2024.
However, the ratio remains significantly higher than the International Monetary Fund's (IMF) recommended threshold of 50 percent for developing countries.
The 2025 Budget Policy Statement projects a decrease in the ratio to 52.5 percent by 2029.
Yet, the Controller of Budget emphasized that achieving a more favorable debt level should remain a priority.
"The National Treasury should develop a roadmap to achieve the benchmark debt threshold of 55% of debt to GDP by 2029 and progress towards meeting the International Monetary Fund's recommended 50% threshold," the report by review of the 2025 Medium Term Debt Strategy in part.
The review also highlights concerns regarding the composition of Kenya's public debt.
As of December 2024, Kenya's public debt stock stood at Sh10.93 trillion, with Sh5.06 trillion owed to external lenders (46 percent) and Sh5.87 trillion to domestic lenders (54 percent).
This debt mix, which has remained largely unchanged, raises concerns about Kenya's ability to respond effectively to economic shocks due to limited fiscal space.
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The MTDS outlines several objectives, including reducing short-maturity debt and lengthening the overall portfolio's average time to maturity, particularly by deepening the domestic bond market.
However, the report notes a troubling increase in short-term debt, which rose from 16.7 percent in June 2023 to 18.6 percent in June 2024.
The COB has called on Parliament to ensure the National Treasury takes measures in the 2024/25 financial year to reduce short-term debt and mitigate high refinancing risks.
Additionally, the review points to an increase in the weighted average interest rate from 3.2 percent in June 2023 to 4.6 percent in June 2024, coupled with a reduction in the grace period for debt repayment from 4.8 to 4.4 years.
This scenario suggests that Kenya will have less time to settle its debts, and at a higher cost, further exacerbating fiscal challenges.
The Controller of Budget has urged the National Treasury to take action to improve interest rates and extend the grace period.
The government now faces the challenge of implementing these recommendations, which aim to reduce the country's vulnerability to external economic shocks while ensuring sustainable fiscal management in the coming years.
