Injectable vaccine // fileFor years, Kenya has celebrated its “Lower
Middle-Income Country” (LMIC) status. But within the health sector, this
classification is increasingly viewed not as a blessing, but as a curse that is
driving the country into more debt.
A new report by the Centre for Epidemiological Modelling and
Analysis (CEMA) at the University of Nairobi reveals that as Kenya climbed the
economic ladder, it simultaneously lost access to the life-saving grants that
once anchored its healthcare system.
In their place, the country has been forced to rely on
concessional loans. This debt that is now suffocating the very sector it was
meant to save.
The logic of international development dictates that as a
country’s income grows, it must transition from donor dependency.
However, for Kenya, this transition is happening faster than
domestic tax revenues can keep up, titled Immediate Impact of External Funding
Withdrawal On Kenya’s Health Sector.
It provides a stark look at how the composition of health
funding has shifted from gifts to debt:
“The on-budget support is provided in the form of
grants or concessional loans and is recorded in the national budget as either
Appropriations-in-Aid or as direct revenue to finance government expenditure.
For the period 2019/20-2025/26, the country cumulatively received more loans
than grants in external funding for health through on-budget support.”
In the 2021/22 financial year, a staggering 83.2 per cent of
on-budget external health support came in the form of loans. Because healthcare
does not generate immediate cash to pay back these creditors, this borrowing
directly increases Kenya’s public debt and damages its international
creditworthiness.
The report identifies that the LMIC status is a direct
barrier to receiving the type of funding Kenya actually needs to sustain its
health gains:
“Access to grants is however hampered by the
categorization of the country into a lower middle-income country (LMIC) which
implies that the country is expected to finance its healthcare through more
loans than grants. … Furthermore, loans borrowed to invest in healthcare do
not have a direct and immediate return on borrowed money invested.”
Kenya, for instance, is gradually transitioning out of Gavi
support to buy vaccines, and recently negotiated with donors to buy it family
planning products for three more years.
Dr. David Khaoya, the report’s lead author, says the crisis
should force hard conversations.
“External funding has long played a significant role in
Kenya’s health sector, but it is unpredictable and unsustainable,” he said.
“This funding shock is a wake-up call. While the challenges
are significant, Kenya and other African countries now have an opportunity to
rethink how health systems are financed and build long-term resilience.”
Kenya’s financial strain is exacerbated by the withdrawal of
major donors. Total external funding for health is estimated to plummet to Sh54
billion in FY 2025/26, down from Sh126 billion just a year prior. As the US
government and other partners exit, they leave behind a massive vacancy that
the Kenyan government is currently struggling to fill with its own budget.
In December 2025, Kenya and the United States signed a
landmark five-year, $2.5 billion (Sh 325 billion) Health Cooperation Framework
in Washington DC. This deal was designed as a “phased transition” to
help Kenya move toward self-reliance. Under the agreement, the US pledged up to
$1.6 billion in support, provided Kenya increases its own domestic spending by
$850 million over the next five years.
However, the implementation of this deal is currently
suspended. Last month, the High Court froze the framework following a petition
by Senator Okiya Omtatah.
The petitioners raised concerns over clauses that would
allow the US access to Kenyan genomic data and biological specimens, arguing
the deal was signed without the public participation required for such a
significant national commitment.
The CEMA report warns that if Kenya continues to rely on
loans to cover basic health needs like HIV treatment and vaccines, the Debt
Trap will only tighten. The researchers argue that the country must find a new
way forward:
“The report also brings out the need to explore
innovative financing mechanisms such as sin taxes, hypothecated levies, impact
bonds, and debt swaps, and to negotiate for more grant financing and better
alignment of external support with unfunded national priorities,” the authors
said.
The others are ,Ombajo Loice, Mutono Nyamai, Nyaikamba
Purity, Oumaima Laraj, Njuguna Brian, Musasia Ryan, Omondi Austine, Thumbi
Mwangi.
“Overall, the analysis highlights that Kenya’s health sector
is highly exposed to external funding shocks,” they said.