Navigating Kenya’s Fiscal Landscape

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An Overview of Public Debt Management
By CPA Peter Kibet Kitur

An Overview of Public Debt Management In the field of national finances, managing public debt is a crucial aspect of economic governance. Kenya, like many nations, grapples with the challenge of balancing fiscal needs and revenue limitations.

This feature examines Kenya’s public debt landscape, and unravels the complexities that define its legal framework and strategies for effective debt management Grounded in constitutional provisions
and the Public Finance Management Act of 2012, we explore Kenya’s approach through the lens of the Public Debt Management Office (PDMO), and shed light on its functions, reforms, and the current state of the country’s public debt. We also examine the legal foundations and proactive measures that underpin Kenya’s efforts to navigate the complexities of public debt Public debt comprises all government
financial obligations attendant to loans raised or guaranteed and securities issued to finance fiscal deficit. In essence, public debt emanates from the need to fund government deficit arising from an expenditure exceeding revenue. Kenya’s debt sources include external creditors (multilateral, bilateral and commercial
lenders) and domestic market through loans and issuance of debt securities. Public debt management is an integral part of macroeconomic environment in any economy.

Prudent debt management based on international best practices requires that its processes be guided by enabling statutes. Sound legal frameworks contribute to achieving the primary objective of borrowing, which is to minimize costs and maintain prudently levels of risk

Kenya’s public debt management that is borrowing, debt servicing, debt recording and reporting is guided by the Constitution of Kenya (Supreme law of Kenya), the Public Finance Management (PFM) Act, 2012; (The Primary law in managing public finances in Kenya); and the attendant Regulations namely
the PFM (National Government) Regulations, 2015 and the PFM (County Governments) Regulations, 2015
(Secondary statutes)

The Constitution of Kenya, 2010: Article 214 (2) defines ‘public debt as loans raised or guaranteed and securities issued and guaranteed by the national government. It gives powers to parliament to provide
public debt management legislation. The Public Finance Management (PFM) Act, 2012, Section 62 (1) (2) (3) and Section 63 provide for the establishment of the Public Debt Management Office (PDMO) within the National Treasury.

PFM (National Government) Regulations, 2015 and the PFM (County Governments) Regulations, 2015: The
Regulations sets the public debt limit as a numerical figure of Ksh. 10 trillion, however, there are ongoing
efforts to amend it to a debt anchor of 55 percent of debt to GDP ratio in present value terms. The regulations also provide for proper financial records, auditing of debt accounts, reporting and disclosure on loans and issuance of guarantees. In addition, it guides borrowing by County Governments and
State-Owned Enterprises (SOES)


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