Greater debt transparency fosters investor confidence, reduces borrowing costs, and enhances debt sustainability, ultimately reducing the risk of shocks that can lead to a debt crisis.
This is a verdict by the International Monetary Fund (IMF), which recently held a conference on legal reform and debt transparency, noting that 85 percent of debt in most developing nations is hidden from key policymakers and the public.
According to the international lender, fewer than half of the countries surveyed require debt management and fiscal reporting by law, meaning that no one government agency or office is responsible for managing debt.
The report further found that whether a country can handle certain types and amounts of borrowing or bond issuances is never fully known by policymakers and parliamentarians.
According to Yan Liu, a general Counsel and director of the Legal Department of the International Monetary Fund, in many cases, the legal definition of public debt is too narrow and excludes SOEs or types of borrowing, such as sub-national lending.
“As a result, some forms of debt fall outside the sovereign’s awareness. This debt accumulates off the balance sheet, without oversight.”
The report comes at a time when various entities in Kenya are calling for debt transparency, with the majority insisting that the true nature of the country’s public debt, estimated at Sh12.1 trillion as of June 30, 2025, is not known.
Mzalendo, a non-partisan Parliamentary monitoring organisation, says that while Parliament is constitutionally mandated to approve public borrowing, a closer look at the Hansard reveals that often, detailed loan agreements are tabled after commitments have already been made.
“In some cases, they are merely ‘noted’ without robust scrutiny.”
It says that this norm of using Parliament as a mere conveyor belt has led to continuous calls for a more transparent, accountable, and participatory debt management process.
According to Mzalendo, this erosion of checks and balances did not occur overnight historically.
In the 12th Parliament, there was a statutory debt ceiling of Sh9 trillion, an attempt to place some limits on how much Kenya could borrow. However, this ceiling was later adjusted through legislative amendments to Sh10 trillion.
“Later, the 13th Parliament amended the ceiling further to anchor the debt as a percentage of gross domestic product (GDP), anchoring the changes in Section 50 of the PFM Act, 201,2, paving the way for even more borrowing.”
Busia County Senator, Okiya Omtatah, is a consistent critic of Kenya’s debt plan.
He wonders why the government continues to borrow, yet the benefits are not visible in terms of tangible development or a reduced cost of living.
“Can we confidently say this is debt we can account for?’’
Other accountability champions, including a one-time presidential hopeful, Jimi Wanjigi, have consistently questioned the legality and utility of some of these loans, terming them “odious debt” borrowings that serve no public interest and are riddled with opacity.
IMF is therefore calling on authorities to be held accountable for their decisions about public debt.
The lender is worried that, in addition to issuing more debt, countries are increasingly using complex and opaque forms of financing.
“New debt instruments such as guaranteed, securitized, and collateralized debt contracts linked to public-private partnerships, state-owned enterprises, or SOEs, and pension funds have appeared on the scene.”
(Star)
