The Kenyan Treasury has proposed a significant shift in government debt management, seeking to assume the role of issuing and managing government bonds and treasury bills currently held by the Central Bank of Kenya (CBK).
This move, outlined in the 2025 Medium Term Debt Management Strategy, aims to streamline debt operations and enhance accountability while seeking to lower interest rates below the current 11% level.
“Support for legal amendments to empower PDMO to perform its functions as Principal in issuance of Government securities,” the government said in the 2025 Medium Term Debt Management Strategy.
Currently, the CBK acts as the fiscal agent of the government, responsible for issuing and managing Treasury bills and bonds.
“The Central Bank of Kenya in its capacity as fiscal agent is assigned the function to administer the domestic public debt including issuance of, payment of a return on, and redemption of, Treasury bills and bonds and other securities of the government in close consultation with the Public Debt Management Office,” The Treasury wrote on their official website.
However, the Treasury believes that consolidating these functions within the Public Debt Management Office (PDMO) will improve efficiency and allow for better control over debt issuance.
The proposed changes are expected to face resistance from the CBK, which currently plays a key role in determining the pricing of government securities.
The Treasury has emphasized the need to enhance the PDMO’s authority and accountability in debt issuance.
As of January 14, 2025, Kenya’s domestic debt stood at KSh 5.9 trillion, with Treasury bonds constituting 85.5% and Treasury bills accounting for 14.8%.
The government also plans to phase out 364-day Treasury bills and explore the issuance of Kenyan shilling-denominated bonds in offshore markets.
