Kenya is facing mounting public debt partly due to weaknesses in the institutions meant to manage and oversee borrowing, the African Development Bank (AfDB) has warned.
The lender’s latest report highlights that both the National Treasury’s debt office and Parliament lack the technical expertise and institutional strength to fully evaluate and control the country’s debt, leaving Kenya vulnerable to financial risks.
The AfDB, in its report titled Unpacking the Drivers of Public Debt Dynamics in Kenya, notes that the National Assembly struggles to carry out proper oversight of public borrowing.
“The ability of the National Assembly to provide oversight and undertake rigorous assessment of the debt situation is limited due to shortage of human and institutional capacity,” the report states. It adds that similar gaps exist at the Public Debt Management Office (PDMO) in the Treasury, which is tasked with ensuring that borrowing is responsible and sustainable.
Years of borrowing for major infrastructure projects, routine government expenses, and refinancing of previous loans have pushed Kenya’s public debt to around 65 percent of gross domestic product (GDP), surpassing the legal ceiling of 55 percent set by law.
Parliament’s role includes controlling debt levels, overseeing public spending, and reviewing fiscal planning through its committees and technical support structures.
The Parliamentary Budget Office (PBO), established in 2007, was intended to provide MPs with expert advice to examine and monitor the budget.
PBO director Martin Masinde told reporters that while the office is technically capable of analysing debt, lawmakers rarely act on its recommendations.
“Capacity is continuous of course, but PBO has adequate capacity to analyse debt issues, but as to whether the advice is taken by members of parliament remains another issue, which is now within the political arena,” he said. Dr Masinde also noted that committees responsible for debt oversight, including the Public Debt and Privatisation Committee, are not operating effectively, and key opposition voices are largely sidelined.
The AfDB report further points out that the Treasury’s PDMO is also underperforming. Loans taken under its watch often have short maturities, high interest rates, currency mismatches, and additional contingent liabilities that increase repayment pressures.
The office, created under the Public Finance Management Act in 2012, was meant to secure affordable borrowing and balance the debt burden between current and future generations.
Auditor-General Nancy Gathungu previously highlighted that the PDMO lacks officers with the right skills to negotiate favorable loan terms. She found that staff shortages and insufficient technical expertise in the office’s debt policy, strategy, and risk management department contribute to the country taking on costly loans.
To address these challenges, the AfDB recommends enhancing technical capacity in both Parliament and the PDMO and establishing an independent fiscal council made up of Treasury officials and academic experts to guide borrowing decisions and manage debt prudently.
