An investigation into the challenges facing domestic public debt management practices in Kenya
Ombwayo, Richard Wesa
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Sound domestic public debt management is critical to both public and private institutions. To enhance capacity in public debt management, the Kenya Government partnered with UNDP, the World Bank, ComSec, and SIDA to undertake public debt management project KEN/84/009 between 1985 and 1995. Further, in the year 2004, the Government partnered with IMF and World Bank in the ongoing Financial and Legal Sector Technical Assistance Project to support reforms in public debt management practices, amongst other aid components. Domestic public debt management practices in Kenya have not been to the required standard, perhaps due to the challenges facing the institutions charged with the responsibility of domestic public debt management. It is as a result of this existing situation that this Study was undertaken. The general objective of the Study was to analyse the domestic public debt management practices in Kenya. The specific objectives included: identifying the challenges facing adoption of prudent domestic public debt management practices; determining the impact of the challenges on the soundness of domestic public debt management practices; and recommending ways and means of improving domestic public debt management practices. The Study adopted an exploratory research design. The target population of the research consisted of forty staff drawn from the debt management departments in the Ministry of Finance, and Central Bank of Kenya. The sampling technique used was simple random sampling through which a sample size of thirty was obtained. The researcher used secondary data analysis to write chapter one and two. Further, the researcher collected data from primary sources using a mail questionnaire. Data was analysed using statistical techniques. Statistical Package for Social studies (SPSS) was used in the analysis and interpretation of the data. The Study revealed that the following challenges have contributed to poor domestic public debt management practices in Kenya: informal objectives; lack of an evaluation procedure for attainment of objectives; inadequate public disclosure of all material information on domestic public debt; lack of a formal risk management framework; lack of a formal domestic public debt management strategy; and a weak institutional framework, both regulatory and managerial. The Study also revealed that the poor practices pose a threat to effective debt management because, if remedial action is not taken, they can lead to unsustainable levels of public domestic debt. Arising from the research findings, various recommendations have been made to improve domestic public debt management practices.