Kenya’s total national debt has reached Ksh 12 trillion, crossing a psychological threshold that has sharpened debates about the country’s long-term fiscal trajectory. The figure, confirmed in the Treasury’s latest Quarterly Economic and Budgetary Review, includes both domestic debt — primarily Treasury bills and bonds — and external obligations owed to bilateral creditors, multilateral institutions, and commercial lenders. Expressed as a share of GDP, the debt stock stands at approximately 74.8 per cent, more than double the level recorded a decade ago.
The build-up reflects a decade of heavy infrastructure financing — much of it through the Standard Gauge Railway, highways, energy projects, and social spending — that successive governments have justified on growth grounds. However, the cost of servicing that debt has now become the dominant fiscal constraint, with debt service expected to consume Ksh 1.8 trillion in the 2026/27 financial year, equivalent to roughly 51 per cent of ordinary revenue.
The Composition of the Debt
Of the Ksh 12 trillion total, domestic debt accounts for approximately Ksh 5.6 trillion, held predominantly by local commercial banks, pension funds, and insurance companies. External debt stands at Ksh 6.4 trillion, of which about 30 per cent is owed to China (through policy banks such as China Exim Bank and China Development Bank), 25 per cent to multilateral institutions including the World Bank and African Development Bank, and the remaining 45 per cent to Eurobond investors and other commercial creditors.
The Eurobond component has been a particular source of concern since Kenya’s 2024 repayment crisis, which was ultimately resolved through a combination of IMF support, a partial buyback, and a new issuance. The government has since been working to reduce its reliance on expensive commercial debt. A Sh50 billion Eurobond buyback completed earlier this year has marginally reduced the outstanding commercial balance, but analysts caution that the structural challenge remains.
“Twelve trillion shillings is a large number, but what matters more is whether it is being serviced sustainably and whether the debt-financed investments are generating returns,” said Dr. David Ndii, a prominent Kenyan economist and former adviser to the Ruto administration. “On both counts, the record is mixed — some infrastructure projects have clearly boosted growth, but others have underperformed against projections.”
New Financing Strategy
Treasury CS John Mbadi outlined a revised borrowing strategy that prioritises concessional financing over commercial debt. The government has secured a $400 million concessional loan from the World Bank under the Kenya Economic Recovery and Resilience Development Policy Operation, and is in advanced talks with the African Development Bank for a further $300 million facility. Both carry grace periods and below-market interest rates that will ease the near-term debt service burden.
On the domestic front, the Treasury is maintaining a busy bond auction calendar, targeting Ksh 586 billion in net domestic borrowing for 2026/27. Following three consecutive months in which the domestic market was undersubscribed — as investors demanded higher yields amid uncertainty — the government has offered more attractive rates, causing domestic borrowing costs to edge up. The 10-year Treasury bond yield now stands at 16.2 per cent, a level that some analysts describe as crowding out private sector credit.
The debt trajectory is especially sensitive in the context of the approaching 2027 general election. President Ruto’s government faces pressure from within the Kenya Kwanza coalition to unlock spending on development projects — particularly in vote-rich constituencies — at precisely the moment when fiscal discipline demands restraint. Parliamentary pressure for supplementary budgets and off-budget spending commitments has been a persistent feature of Kenya’s fiscal politics, and the Treasury will need to hold the line if it is to maintain programme credibility with the IMF and investor confidence in the sovereign bond market.
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