Thus, its the portion of our foreign debt wh4ch has shrunk due to stronger KES.

Money supply is finally higher than public debt. Public debt is now 1,486b versus 606b (up 880b) in Dec 2001, while money supply is now 1,513b versus 368b (up 1,145b) during the same period. Those 10 year changes are revealing. It's the strangest relationship that yields no conventional meaning. Is there any relationship between public debt and money supply?

For every shilling of public debt the following was money supply in the economy - the trends are interesting (see below):

Dec 00 - 60 cents
Dec 02 - 64 cents (Elections)
Dec 07 - 92 cents (Elections)
Apr 08 - 100 cents (Safaricom IPO)
Jun 09 - 90 cents (deficit budget)
Jun 11 - 93 cents (fx speculation begins)
Dec 11 - 102 cents

We see that some changes are credit linked while other spikes are caused by foreign flows (i.e. Safaricom and fx speculation last year), but essentially if you want to fund a budget deficit you need the market to be flushed. When money supply is higher than public debt, you can lower the interest on government debt. Where did all the money come from last week for the auctions?

Yields on government paper declining, debt stock rising. If you want to grow debt stock you must grow the money supply or else interest rates rise (like in November-December); however, when debt stock rises and interest rates are falling it must mean that the CB has increased money supply. Is this what is happening now?

PPP Bill = Public-Private Partnership Bill. (Heads up @KenGen) ;-)

The lack of a proper PPP law has been the major draw-back. The other details shld be subject of negotiations on a case-by-case I presume. Kengen is just one example and a publicly available oppurtunity to profit from, via the NSE, this +ve change in law.