Kenya’s Controller of Budget Margaret Nyakang’o has issued a stark warning over the country’s rapidly growing public debt, which reached Sh11.73 trillion by the end of June 2025, raising concerns about fiscal sustainability and economic stability.
In the latest National Government Budget Implementation Review Report for the 2024-25 financial year, Dr Nyakang’o noted that the government had significantly deviated from its own borrowing policy, with domestic borrowing outpacing external loans despite a medium-term strategy recommending a balanced 50:50 mix.
As of June this year, domestic debt stood at Sh6.33 trillion, making up 54 per cent of total debt, while external debt was Sh5.4 trillion (46 per cent).
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This marks a clear breach of the government’s 2024 Medium-Term Debt Management Strategy, which aimed for an equal split to mitigate exchange rate risks and borrowing costs, said Nyakang’o.
Under President William Ruto’s administration, which took office in September 2022, Kenya’s public debt has grown sharply.
From Sh8.7 trillion in June 2022, the total debt stock has increased by approximately Sh3 trillion in three years, reflecting aggressive borrowing to fund government operations and development projects amid revenue shortfalls.
The report highlights a heavy repayment burden, with debt servicing consuming Sh1.59 trillion in the 2024-25 financial year alone—equivalent to 91 per cent of the budget allocated for public debt.
Interest payments on domestic debt totalled Sh678.25 billion, underscoring the cost of relying on local markets, where interest rates are high.
Nyakang’o warned that the escalating debt service obligations are “limiting cash flows and affecting the operations of business activities, especially Small and Medium Enterprises.”
She also noted that the government’s reliance on short-term domestic instruments has increased refinancing risks and crowded out productive sectors.
The controller of budget further cautioned that the shrinking fiscal space threatens the delivery of essential public services and development programmes.
With debt consuming a larger share of revenue, less funding is available for health, education, and infrastructure, potentially stalling Kenya’s economic revival plans under the Bottom-Up Economic Transformation Agenda (BETA).
The National Treasury has been urged to adhere to prudent borrowing practices and accelerate reforms to boost revenue collection, amid concerns that without corrective action, debt distress could become inevitable.
The report comes at a time when Kenya is already under scrutiny from international lenders and investors over its debt management strategy and fiscal transparency.
It also comes barely a week after the ash-strapped Kenya Kwanza administration secured a vital endorsement after the global rating agency S&P upgraded Kenya’s credit rating.
The surprise decision, analysts said, will provide immediate debt-cost relief but falls short of solving fundamental revenue weaknesses and high spending demands.
On August 23, S&P upgraded Kenya’s long-term sovereign credit rating to ‘B’ from ‘B-’, citing “reduced near-term external liquidity risks” driven by what it sees as robust export earnings, strong diaspora remittances, and a successful Eurobond buy-back operation earlier this year.
The agency maintained a stable outlook, noting expectations that solid economic growth would offset high interest costs and a slow fiscal consolidation process.
The upgrade provides a significant confidence boost for a Treasury that has been facing substantial debt servicing requirements, analysts said.
A sovereign credit rating acts as a global benchmark of a country’s creditworthiness, directly influencing its cost of borrowing in international markets.
A higher rating signals lower risk to investors, allowing a government to secure loans and issue bonds at lower interest rates, thereby reducing its debt servicing costs and freeing up fiscal resources.
In its statement, S&P detailed the improvements, noting that “external data revisions, coupled with strong performances in coffee exports and diaspora remittances, supported a narrowing of Kenya’s current account deficit to 1.3 per cent of the gross domestic product (GDP) in 2024, from 2.6 per cent in 2023.”
The agency highlighted that these improvements “strengthened Kenya’s forex reserves to a record-high $11.2 billion (Sh1.45 trillion) in July 2025, up from $6.6 billion (Sh858 billion) at year-end 2023.”
Furthermore, S&P pointed to Kenya’s successful debt management, stating that the “$1.5 billion (Sh200 billion) Eurobond issuance and concurrent buy-back operation in February 2025 helped lower Eurobond principal repayments to $108 million (Sh14 billion) annually over 2025-2027, from $300 million (Sh45 billion) previously.”
The rating improvement is likely to reduce the premium investors demand to hold Kenyan risk, potentially making future Eurobond issuances and commercial loans less expensive.
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Kenya’s Controller of Budget Margaret Nyakang’o has issued a stark warning over the country’s rapidly growing public debt, which reached Sh11.73 trillion by the end of June 2025, raising concerns about fiscal sustainability and economic stability.
In the latest National Government Budget Implementation Review Report for the 2024-25 financial year, Dr Nyakang’o noted that the government had significantly deviated from its own borrowing policy, with domestic borrowing outpacing external loans despite a medium-term strategy recommending a balanced 50:50 mix.
As of June this
year, domestic debt stood at Sh6.33 trillion, making up 54 per cent of total debt, while external debt was Sh5.4 trillion (46 per cent).
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This marks a clear breach of the government’s 2024 Medium-Term Debt Management Strategy, which aimed for an equal split to mitigate exchange rate risks and borrowing costs, said Nyakang’o.
Under President William Ruto’s administration, which took office in September 2022, Kenya’s public debt has grown sharply.
From Sh8.7 trillion in June 2022, the total debt stock has increased by approximately Sh3 trillion in three years, reflecting aggressive borrowing to fund government operations and development projects amid revenue shortfalls.
The report highlights a heavy repayment burden, with debt servicing consuming Sh1.59 trillion in the 2024-25 financial year alone—equivalent to 91 per cent of the budget allocated for public debt.
Interest payments
on domestic debt totalled Sh678.25 billion, underscoring the cost of relying on local markets, where interest rates are high.
Nyakang’o warned that the escalating debt service obligations are “limiting cash flows and affecting the operations of business activities, especially Small and Medium Enterprises.”
She also noted that the government’s reliance on short-term domestic instruments has increased refinancing risks and crowded out productive sectors.
The controller of budget further cautioned that the shrinking fiscal space threatens the delivery of essential public services and development programmes.
With debt consuming a larger share of revenue, less funding is available for health, education, and infrastructure, potentially stalling Kenya’s economic revival plans under the Bottom-Up Economic Transformation Agenda (BETA).
The National Treasury has been urged to adhere to prudent borrowing practices and accelerate reforms to boost revenue collection, amid concerns that without corrective action, debt distress could become inevitable.
The report comes at a time when Kenya is already under scrutiny from international lenders and investors over its debt management strategy and fiscal transparency.
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It also comes barely a week after the ash-strapped Kenya Kwanza administration secured a vital endorsement after the global rating agency S&P upgraded Kenya’s credit rating.
The surprise decision, analysts said, will provide immediate debt-cost relief but falls short of solving fundamental revenue weaknesses and high spending demands.
On August 23, S&P upgraded Kenya’s long-term sovereign credit rating to ‘B’ from ‘B-’, citing “reduced near-term external liquidity risks” driven by what it sees as robust export earnings, strong diaspora remittances, and a successful Eurobond buy-back operation earlier this year.
The agency maintained a stable outlook, noting expectations that solid economic growth would offset high interest costs and a slow fiscal consolidation process.
The upgrade provides a significant confidence boost for a Treasury that has been facing substantial debt servicing requirements, analysts said.
A sovereign credit rating acts as a global benchmark of a country’s creditworthiness, directly influencing its cost of borrowing in international markets.
A higher rating signals lower risk to investors, allowing a government to secure loans and issue bonds at lower interest rates, thereby reducing its debt servicing costs and freeing up fiscal resources.
In its statement, S&P detailed the improvements, noting that “external data revisions, coupled with strong performances in coffee exports and diaspora remittances, supported a narrowing of Kenya’s current account deficit to 1.3 per cent of the gross domestic product (GDP) in 2024, from 2.6 per cent in 2023.”
The agency highlighted
that these improvements “strengthened Kenya’s forex reserves to a record-high $11.2 billion (Sh1.45 trillion) in July 2025, up from $6.6 billion (Sh858 billion) at year-end 2023.”
Furthermore, S&P pointed to Kenya’s successful debt management, stating that the “$1.5 billion (Sh200 billion) Eurobond issuance and concurrent buy-back operation in February 2025 helped lower Eurobond principal repayments to $108 million (Sh14 billion) annually over 2025-2027, from $300 million (Sh45 billion) previously.”
The rating improvement is likely to reduce the premium investors demand to hold Kenyan risk, potentially making future Eurobond issuances and commercial loans less expensive.
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By Brian Ngugi