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{
    "id": 1382282,
    "url": "https://info.mzalendo.com/api/v0.1/hansard/entries/1382282/?format=api",
    "text_counter": 168,
    "type": "other",
    "speaker_name": "",
    "speaker_title": "",
    "speaker": null,
    "content": "This is the second Report on the Medium-Term Debt Management Strategy that was considered by the Public Debt and Privatisation Committee in the 13th Parliament. I sincerely thank Members of the Committee who diligently worked to ensure that this Report was tabled in this House. The Medium-Term Debt Management Strategy (MTDS) delineates the strategies and initiatives to be implemented by the National Treasury in financing the fiscal deficit that is projected for the Financial Year 2024/2025, and is projected to amount to Ksh703 billion or 3.9 per cent of the GDP. The 2024 Medium-Term Debt Management Strategy has evaluated four alternative funding strategies and their impact on the inherent costs and risks associated with the current public debt portfolio. Therefore, it recommends a borrowing strategy to finance the fiscal deficit for the Financial Year 2024/2025, comprising a net borrowing ratio of 45 to 55 per cent of net domestic borrowing to net external borrowing, respectively. The proposed strategy aims to maximise concessional borrowing for external financing while minimising commercial borrowing, thereby mitigating the cost of debt. On the domestic front, the strategy seeks to reduce refinancing risk by increasing the issuance of medium-to- long-term bonds. Adherence to this strategy will be key to achieving public debt sustainability. Public and publicly guaranteed debt stood at Ksh11.25 trillion as of January 2024, comprising Ksh5.06 trillion in domestic debt and Ksh6.19 trillion in external debt. In nominal terms, this represents 69.7 per cent of GDP. Kenya's debt indicator, as set under the Public Finance Management (PFM) Act 2012, was adjusted in November 2023 to a debt anchor of a threshold of 55 per cent plus 5 that is to be achieved by 2028. Kenya's public debt stock is projected to reach 67.2 per cent in 2024. The subsequent downward movement to 55 per cent is premised on implementing the fiscal consolidation plan as indicated by the fiscal path and economic growth. In this regard, we urge discipline and commitment to this path. As we move into the financial year, we should understand that the current debt stock is characterised by elevated costs and risk factors that are evident through rising weighted average interest rates, heightened refinancing pressure and exposure to real exchange rate risks. Consequently, this indicates an overall hardening of borrowing terms that amplify the cost of sustaining fiscal deficits as compared to previous fiscal years. Public debt continues to be a significant driver of our expenses. It is subsequently crowding out development expenditure. Notably, the proportion of interest servicing expenditures as a share of GDP has increased from 3 per cent to 5.5 per cent over the past decade. This could have had a crowding-out effect on development expenditure, which declined from 10.3 per cent to 4.4 per cent over the same period. There is a need to reverse that. As indicated by movements of the weighted average interest rates of the total debt portfolio, the interest rate risk stood at 7.7 per cent as of June 2023, following a general increase in interest rates that was observed for both external and domestic loans over the past year. Furthermore, the share of debt on fixed interest rates declined while the share of exposure to variable rates increased. This indicated an increase in the interest cost of the debt stock in the coming year. On the refinancing risk, it is noted that the Average Time to Maturity (ATM) of the stock of debt decreased between December 2022 and June 2023, while the percentage of total debt maturing within one year increased slightly. This indicates an increase in the refinancing The electronic version of the Official Hansard Report is for information purposesonly. A certified version of this Report can be obtained from the Hansard Editor"
}