The Treasury is preparing to release early details on the volume of debt it plans to restructure, covering buybacks, bond swaps, and exchanges, as part of efforts to increase transparency in public debt management.

These measures aim to replace maturing obligations with new instruments that extend repayment timelines or offer lower interest rates, easing fiscal pressure on the government.

In the past, bond repayments funded by new issuances were conducted without prior disclosure of their scale to the public.

The country has already applied several strategies to manage the cost of debt. These include early buybacks of Eurobonds due in 2024, 2027, and 2028, and a currency swap linked to loans taken for the construction of the Standard Gauge Railway (SGR).

“The National Treasury shall budget for liability management operations within the national budget and fiscal framework,” the Treasury states in the mid-term debt management draft.

“A specific LMO (Liability Management Operations) vote line in the annual budget estimates under the public debt management shall be provisioned with adequate estimates every year.”

To strengthen oversight, the Treasury plans to set up a liability management unit within the public debt directorate to monitor debt portfolios, plan operations, and guide budgeting for liability management activities.

Buybacks have been a key tool to ease repayment pressures on Eurobonds. For example, Kenya’s first Ksh258 billion due in June 2024 was partially repaid early, easing investor concerns over a possible default that had pushed the shilling to a record low in January 2024.

The government repaid about Ksh186.1 billion by issuing a new Ksh193.5 billion spreading repayments over 2029, 2030, and 2031.

In 2025, further early repayments were made on Eurobonds due in 2027 and 2028, reducing projected payments from Ksh116.1 billion and Ksh129 billion to Sh27.4 billion and Sh47.9 billion, respectively.

Kenya also plans more early Eurobond repayments, including a debt-for-food security swap backed by a Ksh129 billion guarantee from the United States International Development Finance Corporation.

The Treasury has also used bond switches to manage domestic debt risks. In a bond switch or swap, investors exchange an existing bond for another, usually longer-term, with potentially different interest rates.

The first domestic switch bond was introduced in June 2020, offering a six-year infrastructure bond in exchange for a maturing one-year Treasury bill.

A second switch in December 2022 targeted holders of maturing Treasury bills and offered a Ksh87.8 billion six-year infrastructure bond, raising Ksh47.8 billion.

Last month, investors holding a 10-year bond maturing in August 2026 rolled over Ksh26.49 billion into a 15-year bond, marking the first switch in the current fiscal year.

These initiatives aim to manage debt repayments more smoothly, lower borrowing costs, and enhance the technical capacity of the Treasury in overseeing Kenya’s debt portfolio.