The current global financial crisis and changing outlook for sources of external finance highlights the importance of developing domestic market. The high volatility of interest rates and exchange rates require that the cost of borrowing should be properly assessed and measures taken to mitigate risks.
The slowdown in economic growth witnessed during the financial year 2008/9 need to be reversed through counter-cyclical fiscal policies which entail additional Government borrowing to finance programs with higher multiplier effects on the economy. Reducing the vulnerability of debt portfolio to external shocks remains a key challenge in debt management.
The Government has re-evaluated the existing ad hoc debt management strategy as the financing options available in the past have different cost and risk characteristics. The 2009 Medium Term Debt Strategy (MTDS) prepared by the Debt Management Department at the Treasury provides a logical framework for evaluating the proposed financing option for the 2009/10 Budget. It highlights the optimal risk / cost trade-off adopted within a medium term context.
The 2009 MTDS will guide borrowing decisions on the basis of cost and helps to identify, monitor and manage key financial risks in the debt portfolio to ensure that debt remains at sustainable levels. It is observed that even in the worst case shock scenario, Kenya’s public debt ratios are within the internationally set benchmarks. Furthermore, by encouraging transparency in debt management, the MTDS strengthens relations with external creditors, donors, investors and promotes development of the domestic debt market
HON. UHURU KENYATTA, EGH, MP
DEPUTY PRIME MINISTER AND MINISTER FOR FINANCE JUNE 2009