The Controller of Budget, FCPA Dr. Margaret Nyakang’o has recommended that the National Treasury should adopt prudent strategies focused on debt management and revenue collection reforms to prevent more profound financial instability.

Speaking during a meeting with the Liaison Committee chaired by Hon. Gladys Boss (Uasin Gishu) on March 3, 2025, during deliberations on the 2025 Budget Policy Statement (BPS) and the Medium-Term Debt Management Strategy (MTDS), Dr. Nyakang’o proposed a raft of measures that should be implemented to ensure Kenya’s fiscal sustainability and economic resilience.

Some of the measures include consistent review of Kenya’s debt portfolio emphasizing on concessional loans with lower interest rates and favorable repayment terms over expensive commercial borrowing; implementation of comprehensive audits of debt procurement, utilization and sustainability; and avoidance of premature debt commitments by ensuring that projects are fully prepared for implementation before contracting loans.

On the Medium-Term Debt Management Strategy (MTDS), Dr. Nyakang’o expressed concerns over the reduction of the grace period for debt repayment from 4.8 years to 4.4 years, indicating an increase in the interest rate.

Hon. Kuria Kimani (Molo), the Chairperson of the Finance and National Planning Committee questioned how withdrawals are made from the Housing Fund, and how the Social Health Insurance Fund (SHIF) should be treated, as an amount totaling Kshs. 73 billion is not included in the 2025 BPS.

“Take us through the process of approval of funds from the housing fund. How are withdrawals made from the Housing Fund? Secondly, the projected expenditure under the fiscal framework amounts to 4.263 trillion. On the other hand, the projected expenditures as indicated in page 55 of the BPS, is 4.336 trillion, causing a difference of 73 billion. The 73 billion is an account of Social Health Insurance Fund which is included in the ministerial expenditure under State Department for Medical Services. So how should we treat SHIF? should it be included in our fiscal framework?” asked Hon. Kimani.

In response, Hon. Nyakang’o noted that the funds are operated outside the Consolidated Fund, and therefore not part of what she approves.

“There is alot of money that does not pass through the Controller of Budget and the Housing Fund, the SHIF, the Railway Development Fund, and the Petroleum Levy, are operated outside the consolidated fund, and therefore not part of what I approve,” replied Dr. Nyakang’o.

“These funds are also covered in the law but it doesn't have to be like that always. If these funds are to be transferred to my office, Parliament should assess and review the Act, and see the exit clauses in terms of how this can be effected,” she added.

The Committee also heard from the Vice-Chairperson, Commission on Revenue Allocation, Commissioner Koitamet Olekina, who decried a decline in the equitable share allocation to the County Governments from 10.4 percent in FY 2024/25 to 9.3 percent in FY 2025/26, and an increase in the allocation to the National Government from 58.3 percent in FY 2024/25 to 59.1 percent in FY 2025/26.

“This will have a negative impact on the service delivery to the citizens which amounts to a crawl back to the objects of devolution. It is therefore important that Parliament protects devolution by ensuring that revenues raised nationally are equitably shared between the National and County Governments,” implored Comm. Olekina.

On her part, the Auditor General FCPA Nancy Gathungu, while presenting her analysis on the 2025 MTDS, which guides public debt management over the Financial Years 2025 to 2028, noted that the cost of domestic borrowing is more than two times the cost of external borrowings, citing that the interest rates on domestic borrowings in the FY 2023/24 amounted to Kshs. 533.7 billion (70%), compared to Kshs. 218.6 billion interest on foreign borrowings (30%).

The Committee is also examining reports from Departmental Committees, pertaining the 2025 BPS, from the Ministries, Departments and Agencies (MDAs) that they oversight.