The National Treasury is seeking to swap Sh87.8 billion worth of short-term debt with longer-term debt to create breathing space and fund its operations in a tight fiscal environment.

National Treasury and Economic Planning Cabinet Secretary Prof Njuguna Ndung'u

Treasury Cabinet Secretary Njuguna Ndung’u had intimated during his vetting last month that a debt-swap plan would be adopted to give the government a longer window to repay its domestic debt.

The Central Bank of Kenya (CBK) has floated an infrastructure bond maturing in six years seeking to raise Sh87.8 billion from investors who are already holding Treasury bills issue numbers 2494/91, 2454/182, 2380/364 and Treasury bond issue number FXD1/2021/2. The debts mature in 91 days, six months, one year and over two years, respectively.

Investors who hold these instruments have until November 30 to apply for switching to the longer-term infrastructure bond.

“The bond will be tax-free as is the case for infrastructure bonds as provided for under the Income Tax Act,” said CBK in a prospectus for the switch auction. This implies that the government is using the tax-free sweetener to encourage investors to take up the switch.


In essence, the government is raising longer-term debt from the domestic market to help it retire short-term debt.

The proposed debt swap comes at a time the government is running on empty amid high debt repayment obligations, growing subsidy expenditure to ease the burden of the high cost of living and rising spending on development projects.

President William Ruto’s government spent Sh43.9 billion in the first quarter of the financial year 2022/23 on subsidies, mainly on fuel and fertiliser, nearly twice the Sh22.2 billion that was budgeted for subsidies for the entire fiscal year.