The Treasury has proposed taking over the Central Bank of Kenya’s (CBK) responsibility for selling government bonds and treasury bills. This change aims to reform Kenya’s debt management by separating fiscal (government spending) and monetary (money supply and interest rates) responsibilities.
Details of the New Development
Currently, the CBK acts as the government’s fiscal agent, meaning it manages the issuance and sale of treasury bills (T-bills) and bonds. This role includes determining auction processes and managing repayments. However, Under the proposal, the Public Debt Management Office (PDMO) would take over CBK’s role.
This office would manage government securities, set the borrowing schedule, and decide on debt pricing. The goal is to lower interest rates on government debt (currently above 11%) in line with Treasury CS Mbadi’s agenda.
Now, The CBK might resist this change because it reduces its control over key financial operations. However, the Treasury argues this shift will create a clearer separation of duties and improve debt management.
The Treasury claims it currently has limited control over public debt auctions. By giving the PDMO full authority, the Treasury aims to increase accountability in how government debt is issued and managed.
As of January 14, 2025, Kenya’s domestic debt stands at KSh 5.9 trillion. Treasury bonds make up 85.5% of this debt, while treasury bills account for 14.8%. This shows bonds are the primary method of government borrowing.
The Treasury plans to phase out 364-day treasury bills (1-year bills) and introduce bonds in Kenyan Shillings for offshore markets. This shift is part of a broader debt management strategy for 2025.
Right now, while the Treasury decides how much debt to raise, the CBK is responsible for setting prices for debt auctions. The CBK consults with the PDMO to perform this role, but the Treasury wants to centralize these functions under the PDMO.
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