The National Assembly has directed the Treasury to appoint a new director-general of the public debt management unit within 60 days amid secrecy over the hiring process that started in January.
The Treasury and the Public Service Commission (PSC), which oversees the hiring of civil servants, have been guarded over the post that technically fell vacant after Haron Sirima’s exit was announced in January. Dr Sirima had been in charge since 2018.
The office is critical in Kenya’s handling of public debt, including supervising the servicing of loans, which has emerged as a top risk for the country.
The PSC advertised for the position in late January, but has not made public the list of those who sought the job, the shortlisted candidates and the dates of the interviews.
The Parliamentary Committee on Public Debt and Privatisation directed the Treasury to appoint fill the post within 60 days from June 4 -- by August 4.
“That, subject to Section 64 (1) of the PFM Act, 2012, the National Treasury should within sixty (60) days, appoint the Head of the Public Debt Management Office as an Accounting Officer in order to improve the operational efficiency of the Office in the management of public debt servicing expenditures,” the Committee’s chairperson, Abdi Shurie, told Parliament through a report he tabled in the House on June 4.
The PSC has traditionally published names of candidates who have shown interest in top jobs, those shortlisted and interview dates.
This information has not been forthcoming in the hiring of the head of Kenya’s public debt management office.
“Please consult Principal Secretary (PS) Treasury for updates,” said Anthony Mwaniki, the chairperson of PSC, which has the legal mandate to hire for the position.
Treasury PS Chris Kiptoo said the interviews for the candidates were carried out on Tuesday (June 18) where six candidates were shortlisted and one was picked.
“We did the interviews yesterday (Tuesday June 18) for a new DG and we have a candidate. Please wait for PSC to formally communicate,” said Dr Kiptoo. “The Public Service Commission (PSC) is responsible for the recruitment of DG Public Debt Management Office. The Commission had advertised the position, shortlisted and interviewed the candidates. The National Treasury is awaiting PSC’s decision.”
Dr Sirima’s exit was announced at a time when Kenya was tackling acute liquidity challenges caused by uncertainty over its ability to access funding from financial markets before a $2 billion Eurobond matures in June this year.
In mid-February, Kenya sold a new $1.5 billion Eurobond at great cost to fund the buyback of a large portion of the $2 billion bond, which is maturing this week.
The country had been on the radar of investors because they feared it might not be able to repay due to its strained public finances.
A borrowing-fuelled infrastructure drive is partly why Kenya’s debt-to-GDP ratio now tops 70 percent. Credit ratings agency Fitch estimates the country will spend almost a third of its government revenues just on interest payments this year, leaving little cash for project spending.
Kenya’s public debt amounted to Sh10.54 trillion as of April 2024, comprising foreign and domestic debts of Sh5.2 trillion and Sh5.3 trillion respectively.
The Consolidated Fund Services (CFS) comprises mandatory government expenditures on debt service payments, pension and salaries for constitutional offices and the spending on these budget items is projected at Sh1.99 trillion and Sh2.06 trillion in the 2023/2024 fiscal year and 2024/2025 fiscal year respectively.
Interest payments on public debt is estimated at more than Sh1 trillion in the 2024/2025 fiscal year. Kenya took up the debut $2.75 billion Eurobond in two tranches— a 10-year paper at 6.78 percent interest rate and a five-year paper at 5.87 percent.
The five-year issuance was repaid partly using the proceeds of another $2.1 billion Eurobond issued in May 2019.
The debt declined by Sh598 billion from Sh11.4 trillion due to the appreciation of the Kenya shilling against the US dollar and the euro, which together account for up to 88 percent of the denomination of the debt stock.
“At this level, public debt stock equates to 65 percent of gross domestic product (GDP) in nominal terms. The debt-to-GDP indicators suggest that increased economic effort and income capacity are necessary to meet public debt obligations,” the parliamentary Public Debt and Privatisation Committee said.
Expenditure on public debt constitutes 88 percent of the CFS expenditures.
“This level of expenditure reflects a growing rigidity in our fiscal framework as evidenced by interest expenditure in FY 2024/2025 amounting to Sh1.01 trillion or 5.6 percent of GDP. Addressing this issue is critical in enhancing budget flexibility and ensuring efficient resource allocation,” the committee said.
The depreciation of the Kenya shilling against the dollar in the 2023/2024 fiscal year led to an increase of up to Sh1.2 trillion in external debt stock and the rise in interest rates escalated the cost of the overdraft facility by Sh4.2 billion to Sh12.6 billion.
