The Central Bank of Kenya (CBK) has responded to the Treasury’s proposal to transfer the responsibility of government debt issuance from the CBK to the Public Debt Management Office (PDMO).
While responding to a question raised by The Kenya Times, Governor Thugge said the proposal was still in the draft stage and therefore not final.
Governor Kamau Thugge stated that the CBK has engaged with the National Treasury concerning the proposal in the 2025 draft medium-term strategy.
“There will be some revisions to that Debt management strategy which will be made public,” he said.
“The strategy has to be submitted to Parliament by February 15 together with the Budget Policy Statement and other documents.”
He added, “I think what was submitted was more of a draft not an agreed position. We will have to wait and see the revised strategy.”
The CBK currently acts as the fiscal agent of the government and issues and manages T-bills and bonds.
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If approved, the Public Debt Management Office (PDMO) will administer government securities, including setting the borrowing calendar and pricing the debt.
The move, which seeks to lower interest rates on government securities below the current 11%, is in line with Treasury CS John Mbadi’s agenda.
“Support for legal amendments to empower PDMO to perform its functions as Principal in issuance of Government securities,” part of the 2025 Medium Term Debt Management Strategy read.
Mbadi also expressed concerns, suggesting that it was not directly in control of public debt auctions and could not be held entirely accountable.
“Consolidate auction functions under PDMO as the Principal in domestic debt borrowing and not under a committee -to make PDMO more accountable in public debt issuance,” Treasury added.
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Phasing Out 364-Day Treasury Bills
In the 2025 Medium Term Debt Management Strategy, the government also fronted plans to phase out the 364-day treasury bills and issue Kenyan Shilling denominated bonds targeting offshore markets.
“The 2025 debt management strategy seeks to gradually reduce the stock of Treasury bills while lengthening maturity of public debt instruments and deepening the domestic debt market through issuance of medium to long term debt securities accompanied by debt market reforms,” read part of the draft.
While the Treasury decides on the debt size, the CBK handles the pricing of individual debt auctions in consultation with the PDMO.
“The Central Bank of Kenya, in its capacity as fiscal agent, is assigned the function of administering domestic public debt, including the issuance of payment of returns on, and redemption of Treasury bills, bonds, and other government securities, in close consultation with the Public Debt Management Office,” the Treasury wrote on their official website.
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