Policy Watch

Debt vs GDP / Bonds vs bills

All Data - Kenya

Year 2012 2013 2014 2015 2016 2017
GDP (billions US$) 49.62 54.44 72.54 - - -
Total Outstanding Amount (Billion US$) 11.49 14.89 - - - -
Bonds 9.15 11.10 - - - -
Bills 2.34 3.80 - - - -
Outstanding Amount/GDP (%) 23.15% 27.35% 0.00% - - -

Country Summary

GDP growth remained robust in 2014 at 5.3%. The expansion of construction, manufacturing, finance and insurance, information, communications and technology, and wholesale and retail trade buoyed GDP. The economy slowed in the first half of 2015, but growth is estimated to have reached 5.5% by year-end. As shown in the table below, overall GDP growth prospects are 6.0% and 6.4% for the years 2016 and 2017 respectively. Consumer Price Index (CPI) inflation projections remain at around 6.0% over the same period. The short- to medium-term positive growth projections are based on the assumptions of increased rainfall and enhanced agricultural production, a stable macroeconomic environment, continued low international oil prices, the stability of the Kenya shilling (KES), improved security boosting tourism and reforms in governance and justice.

Political activity in 2015 continued to centre on two areas: a call by the opposition party, Coalition for Reforms and Democracy (CORD), to amend the constitution and county governments seeking to raise national government financial transfers from 15% to 45%.

Source : African Economic Outlook 2016

Monetary policy & Public debt

The objective of the Kenyan Monetary policy is to achieve price stability. The detailed objectives of the Central Bank of Kenya (CBK) is to keep the medium-term inflation rate below 5% and the long-term inflation rate below 9%; the month-on-month inflation range is currently 5% ± 2.5. The Central Bank uses different instruments to attain these objectives: open market transactions, discount window facilities or reserves requirements.

The formulation of the monetary policy is the responsibility of the Monetary Policy Committee (MPC) which meets every two months and reviews key interest rates. The MPC is also in charge of the bi-annual monetary policy statement.

According to the 2015 Medium-term Debt Strategy (MTDS), the  projected debt stock for 2015-16 is 46.8% of GDP (of this percentage, 48.7% is external debt and 51.3% domestic debt). As of June 30th, 2014, the total domestic debt was valued at KES 1,284.3 billion, or 25.4% of GDP. The MTDS also targets a T-bills to T-bonds ratio of 30:70. 

In the year-end of 2014, the Kenyan shilling was subject to much fluctuation caused by the strengthening of the U.S dollar; as a result, the MPC now meets monthly and the key rate has been increased from 8 to 11.5% between June and September 2015.

Market Structure

Market participants


The Central Bank of Kenya (CBK) acts as the fiscal agent of the government; it issues on behalf of the National Treasury (NT).

Other current and past issuers include municipalities (Nairobi City County), utilities companies (Kengen, Safaricom), regional institutions (Preferential Trade Area Bank or PTA) and mortage finance institutions (Shelter Afrique, Housing Finance).

Investor base

In June 2014, banking institutions (including the Central Bank) were the largest holders of T-bills (62.5%), followed by other types of investors (30.2%) and insurance companies (6.1%). For T-bonds,  the ranking order remains the same: commercial banks (47.7%), others (37.4%), insurance firms (11.1%) and parastatals (3.8%). Foreign retail investors are allowed to participate to the government securities market only through nominee accounts. 

Other intermediaries

In March 2013, an informal Bond Market Association was created. It has not yet been registered with the Kenyan Authorities.

Instruments issued 

Instruments issued by the Central Bank 

The CBK auctions 91-, 182- and 364-d T-bills and offers mostly fixed-rated Treasury bonds for the following maturities: 2-, 5-, 10-, 15- , 20-,25- and 30-years.

Treasury bonds constitute the first asset class of government securities, representing more than 70% of all Treasury securities sold in the market. In theory, the issues may differ with regards to the interest rate structure (fixed or floating), the maturity and the purpose. 

Instruments issued by other agents

Instruments issued by municipalities, state-owned companies and utilities companies have essentially longer maturities. In the 1980s, the Nairobi City County issued a 25-year bond that was later redeemed. Kengen, an electricity generating company, Safaricom, a state-owned Telecom firm, and Housing Finance, a mortgage finance company, have also issued and listed on the NSE.


In June 2014, the market weighted average rate on T-bonds was 12.15%.

Primary and Secondary Markets

Primary Market

All investors, foreign and nationals alike, are allowed to participate at the auctions; foreigners however, have to open nominee accounts with one of the authorized agents. For the Kenyan Diaspora, a guide has been made available by the Central Bank.

Competitive and non-competitive bids are practiced. The minimum amount required to invest in a Treasury bond is KES 50,000 and to invest in a Treasury bill is KES 100,000.

Secondary Market

OTC vs Exchange listed

Treasury bonds and all other debt securities list and trade on the NSE. Treasury bills are not available on the NSE. The trading hours on the NSE are from 9:00am to 3:00pm local time (GMT+3).

In the fiscal year ending 2014, bond turnover was KES.411 billion; this is a decline of 33 % compared to the precedent year figure (KES 618 billion).

Clearing, settlement and custody

In the Capital Markets MasterPlan (2014-23) developed by the Kenyan CMA, there is the project of creating a single central securities depository (CSD) for all papers (government and private) and that of implementing a full vs delivery payment system. 

Recent developments

In June 2014, Kenya launched its first Eurobond and raised USD 2 billion; the issue was split into two tranches: a USD 500 million, 5-year bond bearing 5.875% and a USD 1.5 billion, 10-year, 6.875% bond. The issue was considered the largest Eurobond sale by an African country and is listed on the Irish Stock Exchange.

In 2014, the NSE also implemented a system that allows day trading for government bonds only; the settlement cycle for government bonds may now fall down to T+0. A new bond trading system was also introduced in 2014 that enables electronic trading across all bonds (government and corporate). 

The Capital Markets Authority (CMA) launched a 10-year MasterPlan for the years 2014-23, with the vision of transforming Kenyan Capital Markets into the heart of African Capital Markets). Specific objectives of the plan are to achieve a country financing through capital markets of 30% of GDP, an equity market capitalization of 70% and a corporate bond market capitalization of 40% (vs current 2%). 

Investor Protection 

Investor rights are protected under Kenyan law; Kenya has in place an independent judicial system and process. The deposit protection and investor protection funds seek to compensate investors in the event of fraudulent occurrences.

With the complete automation of the trading and settlement process, it has now become more difficult for dealers to carry out fraudulent activities since the Central Depository System carries out the custodial function for individual and institutional investors.

Guide to Buying Bonds

Procedures for market participation

To participate in the primary market, investors must first open an account (free of charge) with the Central Depository & Settlement Corporation Limited (CDSC). Details on the opening of a CDS account are available here.

Investors must then submit an application form to the Central Bank or to one of its branches; forms for T-bills and T-bonds are available on the Central Bank website.

Investors may place their application either as competitive or non-competitive (average) bids. The minimum amount required to invest in a Treasury bond is KES 50,000 and to invest in a Treasury bill is KES 100,000; the maximum an investor can invest per CDS account and tenure is KES 20 million.

Further details on the investment process for T-bills are available here and for T-bonds, click here

Settlement Cycle

Settlement ranges from T+3 to T+0.


Bonds with maturities ranging between 2 and 9 years bear a withholding tax rate of 15%. Bonds with maturities of 10 years or more bear a withholding tax rate of 10%. There is no capital gains tax.

Kenya has signed double taxation agreements with the following countries: Zambia, Norway, Denmark, Sweden, U.K, Germany, Canada and India. 

Market restrictions

Openness to International investors 

The Kenya Investment Authority, KenInvest, is the Authority in charge of developing local and foreign investment in the country. Foreign participation in the capital markets is regulated by the Capital Markets (Foreign Investors) Regulations, 2002. This regulation currently addresses only equity investments.

Kenya is making efforts to harmonize regional tax regimes with Uganda and Tanzania. The East Africa Community (EAC) is also looking at removing any barriers and at creating a common stock exchange.

Capital controls 

The Exchange Control Act was abolished in 1995 allowing free remittance of capital, profits and income after tax. Investors are free to repatriate the entirety of their profits, after they have fulfilled their tax duties with respect to the Kenyan Revenue Authority (KRA).

Profit repatriation

There are no restrictions on FX repatriation or profit repatriation. A Certificate of Approved Enterprise permits foreign investors to repatriate initial capital investments and remit future dividends.

Credit rating

In January 2015, Fitch affirms B+ rating on the long-term foreign currency issues (and BB- on local curreny issuances). S&P also affirmed Kenya rating at B+ on April 2015.

List of Primary Dealers

The Capital Markets Authority (CMA) has not disclosed yet the names of the financial institutions that will operate as Primary Dealers (PDs).