CS Mbadi Under Pressure to Reduce Kenya’s Debt-to-GDP Ratio by 2029

Treasury Cabinet Secretary John Mbadi has been directed by the Controller of Budget, Margaret Nyakango, to lower Kenya’s GDP debt ratio to 55% by 2029. The recent report indicates a decline in public debt from 71.9% to 65.7% and underscores the necessity for improved debt management and revenue collection strategies to prevent financial instability.

Treasury Cabinet Secretary John Mbadi is facing pressure from Margaret Nyakango, the Controller of Budget (COB), to bring down Kenya’s Gross Domestic Product (GDP) debt ratio to 55% by the year 2029. This recommendation emerged from a review of the 2025 Medium-Term Debt Management Strategy, emphasizing the need for a strategic roadmap focused on achieving this fiscal target.

In her report, Nyakango highlighted a decrease in Kenya’s total nominal public debt from 71.9% in 2022 to 65.7% by June 2024. The COB’s assessment indicates that, as stated in the 2025 Budget Policy Statement, the debt ratio should further decline to 52.5% by 2029, which remains above the International Monetary Fund’s recommended limit of 50% for developing nations.

Nyakango stressed the importance of prioritizing better debt management, urging the National Treasury to implement strategies that promote effective debt management and enhance revenue collection to avert potential financial instability. Additionally, she revealed that as of December 2024, Kenya’s public debt accumulated to Sh10.93 trillion, divided between Sh5.06 trillion owed externally and Sh5.87 trillion domestically.

For the first half of FY 2024/2025, public debt expenditures totaled Ksh 666.34 billion, an increase from Ksh 597.58 billion in the same period of the preceding fiscal year. This uptick primarily correlates with the repayment of domestic debt related to treasury bills and bonds, which reached Ksh 432.83 billion compared to Ksh 355.17 billion the prior year.

Furthermore, Nyakango urged Parliament to compel the National Treasury to communicate their strategies for reducing short-term debts and alleviating high refinancing risks. She clarified that the shrinking timeline for debt settlements has elevated interest rates, necessitating certain explanations from the Resource Mobilisation Department regarding measures for improving interest rates and extending grace periods.

In summary, the Controller of Budget has set critical financial targets for the National Treasury, emphasizing the need to lower the debt-to-GDP ratio while addressing public debt management and financing strategies. The current debt figures highlight significant challenges, necessitating prioritized actions to stabilize the fiscal landscape. Continuous monitoring of spending and effective revenue collection reforms will be vital in achieving these targets and enhancing Kenya’s economic stability.

Original Source: www.kenyans.co.ke