Treasury Cabinet Secretary Njuguna Ndung'u has clarified the rationale behind Kenya's decision to continue opting for long-term foreign loans, despite the ongoing Eurobond payback process.
Appearing before the Public Debt and Privatization Committee, chaired by Balambala Member of Parliament Abdi Shurie, on February 27, the Cabinet Secretary shed light on the Medium-Term Debt Management Strategy (MTDS) for the financial year 2024/25.
According to the CS, long-term borrowing is a bid to minimize refinancing risks and lighten the Average Time Maturity for domestic and total debt.
"Use of long-tenor Treasury bonds for refinancing domestic debt is set to raise new deficit funding resources along with a reduction in the proportion of short-term domestic debt," CS Njuguna stated.
CS Njuguna highlighted that despite the borrowing, Kenya will meet its current and future debt payment obligations without compromising other budgeted programs.
"The latest Debt Sustainability Analysis report indicated that public debt remains sustainable, though the distress level is elevated due to the adverse effects of multiple shocks experienced by the country since 2020,” CJ Njuguna clarified.
He further assured the committee that the treasury was working together with other stakeholders in the market such as the Central Bank of Kenya (CBK) and Capital Market Authority (CMA) to maximize the domestic debt reforms.
Furthermore, the National Treasury was assured of sustaining the domestic debt and improving the performance of the primary issuance as well as promoting the vibrancy of the secondary market.
"The National Treasury commits to bring down the present value of debt as a percentage of GDP from 67.2 per cent to 55 per cent over five years as per the recent amendment of the Public Finance Management Act on the debt anchor," CS Njuguna commented.
These reforms are to ensure a credible yield curve as far as government security is concerned.
His clarification comes a few days after the Deputy Auditor General questioned why the National Treasury relied too much on foreign loans to offset public debts.
The Deputy Auditor General further cautioned the government over fluctuation in the currency following the Ksh219 billion Eurobond payback.
