Weak Shilling And High Interest Rates Deepen Kenya’s Debt Burden
Business Updated: 29 April 2026 17:44 EAT
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Kenya’s public debt stood at about Sh11.8 trillion as of June 2025, according to Treasury-linked data and the latest Economic Survey framework, reflecting a continued rise in borrowing to finance budget deficits and debt refinancing needs.
The figures show that domestic debt accounts for roughly Sh6.3 trillion, slightly higher than external debt, which is estimated at about Sh5.5 trillion. This split highlights Kenya’s growing reliance on the local financial market to meet funding requirements.
Domestic borrowing is mainly raised through Treasury bonds and Treasury bills, which are purchased by commercial banks, pension funds, insurance firms, and individual investors. These instruments have become the government’s primary financing tool as external borrowing conditions tighten globally.
External debt, on the other hand, is largely denominated in foreign currencies and exposes the country to exchange rate risks. A weaker shilling increases the cost of repayment, adding pressure to the national budget.
Major external creditors include multilateral institutions such as the World Bank, International Monetary Fund, and African Development Bank, alongside bilateral lenders like China, Japan, and France.
Kenya also holds commercial debt through Eurobond issuances and syndicated loans from international banks. These borrowings have been critical in financing infrastructure projects but have also contributed to rising repayment obligations.
Debt servicing remains one of the biggest fiscal pressures facing the government. Annual repayments, including interest and principal, are estimated to exceed Sh1.7 trillion, consuming a significant share of total revenue.
A large portion of domestic borrowing is now used to refinance maturing debt rather than fund new development projects, a trend that has increased rollover risks in the domestic bond market.
The overall debt stock represents about 67 to 68 percent of gross domestic product, placing Kenya in a high-debt category, though still within what authorities consider manageable limits under current fiscal assessments.
However, economists warn that the rising debt burden is constraining fiscal space for development spending, particularly in health, education, and infrastructure expansion.
The increasing cost of borrowing is also linked to higher domestic interest rates, which have made Treasury securities more expensive to service over time.
At the same time, slower revenue growth has intensified reliance on borrowing, creating a cycle where new debt is increasingly used to pay existing obligations.
Policy analysts note that stabilising the debt trajectory will require stronger revenue collection, reduced budget deficits, and a gradual shift away from heavy short-term domestic borrowing.
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FELIX MAKONA
FACT FINDER AND DATA DRIVEN JOURNALIST. DATA MINING AT IT'S BEST. GET FACTS RANGING FROM MATTERS DISABILITY AND INCLUSION, POLITICS, ECONOMY, SPORTS AND GENERAL NEWS AROUND THE WORLD