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The average time to maturity for Kenya’s public debt fell to 7.8 years in June 2024 from 9.4 years in 2023 on the issuance of shorter-dated debt instruments as investors raised their risk perception on the exchequer.
The lower duration to maturity exposes the country to higher refinancing risk, which occurs when the government has to repay large amounts of debt in a short period.
The debt disclosures are contained in the National Treasury‘s 2023/2024 annual public debt management report.
The period saw the government issue or reopen a series of short-term bonds in the domestic market, after a rise in interest rates made it costly to float long-dated bonds—they would burden the taxpayer with high servicing costs over a longer period.
In the external market, the government faced difficulties raising commercial debt at the prevailing rates at the time, after advanced economies (considered a safer option for investors) raised their rates to fight high inflation. Total public debt stood at Sh10.58 trillion in June, with the domestic market owed Sh5.41 trillion and external lenders Sh5.17 trillion.
“The average time to maturity for both domestic and external debt continues to decline though marginally for the past three years which may be attributed to risk exposure concerns among local and foreign investors and limited access to semi and concessional loans with longer maturities due to Kenya’s graduation to a lower middle-income country,” said the Treasury in the debt report.
The period to maturity for debt is one of the measures the Treasury takes into account when assessing the risk associated with public debt, and the overall sustainability of the debt.
Other measures include debt service as a percentage of revenue and Gross Domestic product (GDP), interest payments as a ratio of revenue, the weighted average interest rate on outstanding debt, and the redemption profile of debt (amount to be redeemed per year).
Other measures include the composition of fixed and variable rates on public debt and the currency composition of foreign debt. On domestic debt, the average time to maturity for bonds came down to 7.5 years from 8.6 years in 2023.
The proportion of bonds with remaining time to maturity of between one and five years increased to 39.8 percent from 36.9 percent in the period, while those with more than 10 years of tenor left fell to 22.2 percent from 34.3 percent.
On external debt, the maturity profile improved after the government retired the 10-year, $2 billion Eurobond which was due for repayment in June 2024.
This saw the portion of external debt maturing in under five years fall to 0.3 percent from 5.6 percent in 2023. The share of debt due in two to five years rose from 10.5 percent to 11.6 percent, while the debt with a tenor of six to 10 years went up from 20.2 percent to 23.6 percent.
The portion of external debt with a maturity profile of over 10 years rose to 64.4 percent from 63.8 percent, helped by long-term credit from the IMF and World Bank.
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