The government is betting on long-tenure Treasury Bonds to refinance the maturing domestic debt in its medium-term debt management strategy. This will be a shift from local borrowing from the banks that have seen domestic debt hit the Sh4.5 trillion mark.
In the new plan, the National Treasury has signaled the issuance of new switch bond auctions this year as part of plans to manage debt by prolonging the maturity of outstanding domestic securities.
The exchequer plans to issue medium to long-term bonds to replace shorter-dated instruments such as Treasury Bills as it faces record-high domestic maturities in 2023.
Read: Ruto’s Cabinet Seeks To Transform Debt Ceiling
The uptake of the government’s long-term paper has however been slow halting plans to use the funds in offsetting domestic debt. Already the Treasury has initiated the process of amending the debt ceiling from the numerical number of Sh10 trillion to a debt anchor of 55 percent of debt to GDP in present value terms.
As of December 2022, the government owed Sh4.7 trillion in external debt and Sh4.5 trillion in domestic debt. In a bid to cushion the government from further borrowing, Treasury plans to cut the budget for the next financial year by at least Sh133 billion.
President William Ruto’s administration has been on a revenue mobilization strategy to reduce the dependency on external borrowing to finance its operations. The growth in public debt is attributed to external and domestic borrowing and the appreciation of the foreign currency exchange rate against the Kenyan shilling.
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