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The government plans to continue with various reforms targeting to tame the runaway public debt and reduce budget shortfall projected at Ksh 923.2 billion in the next financial year.
While making FY2025/26 budget pronouncement before the National Assembly, National Treasury and Economic Planning Cabinet Secretary John Mbadi said the government will continue pursuing use of concessional loans from multilateral, bilateral and limited commercial sources such as international bond issuances to finance the deficit and slow the growth of public debt.
“Further, the Government will explore emerging funding instruments such as debt swaps, diaspora bonds, sustainability linked bonds and Environmental, Social and Governance debt instruments to fund budget deficit and manage public debt. This strategic approach will not only diversify our financing options but also strengthen international partnerships and promote sustainable growth,” said Mbadi.
In the FY2025/26 budget, Treasury plans to borrow Ksh 287.7 billion equivalent to 1.5pc of gross domestic product from the external market and net domestic borrowing of Ksh 635.5 billion, which is equivalent to 3.3pc of GDP to finance the budget deficit and meet total expenditure amounting to Ksh 4.29 trillion.
Treasury is also planning to lift the veil covering public debt by ensuring there is transparency.
To this end, Mbadi said National Treasury is in the process of integrating the Commonwealth Meridian Debt Management system with the Integrated Financial Management Information System (IFMIS) and the core banking systems of Central Bank of Kenya as well as conduct audit on public debt.
“Mr. Speaker, Kenyans have expressed concerns about the public debt. Indeed, there is a perception of lack of transparency in the management of public debt. In this regard, I requested the Auditor General to conduct a comprehensive audit of public debt. This audit is currently ongoing and once completed, the report will be shared with this House,” he added.
According to Mbadi, Kenya’s public debt is projected to remain within sustainable levels over the medium term and decline progressively from 63pc in present value terms to 55pc.
Treasury also plans to diversify the Government’s sources of financing by exploring Shariah-compliant products which Mbadi says are in the pipeline. This follows the successful issuance of the first Sukuk Bond which raised Ksh 3.2 billion which has since been used in developing affordable housing.
Mbadi backs the measures to help reduce fiscal deficit from 5.3 percent of GDP in the FY 2023/24 to 2.7pc of GDP in the FY 2028/29.
