Treasury prioritises Sh1.09 trillion debt bill over development
This figure is up by Sh94.2 billion from the Sh995.76 billion set aside for debt repayments in the current financial year.
The Treasury plans to spend Sh1.09 trillion to repay public debt in the 2025–26 financial year, in what is now the single largest budget item and a growing sign of how debt is draining resources away from public services and infrastructure.
This figure is up by Sh94.2 billion from the Sh995.76 billion set aside for debt repayments in the current financial year.
Domestic lenders will receive Sh851.42 billion, while Sh246.26 billion will go to international creditors.
Kenya’s total debt stood at Sh11.35 trillion in March, a steep rise from Sh2.84 trillion a decade ago.
This massive growth, now equivalent to 70 percent of GDP, is weighing heavily on the national budget and limiting funding for development projects.
Treasury Cabinet Secretary John Mbadi is expected to unveil a Sh4.23 trillion spending plan for the 2025–26 fiscal year.
The budget is pegged on revenues and appropriations-in-aid of Sh3.31 trillion, leaving a deficit of Sh876.1 billion. The shortfall will be covered through borrowing—Sh284.2 billion from external sources and Sh591.9 billion from the domestic market.
Interest payments in the current financial year alone have reached Sh995.76 billion—Sh767.24 billion for domestic debt and Sh228.52 billion for external debt—according to Treasury’s programme-based budget.
The increasing cost of borrowing has limited the government’s ability to fund education, health, and other key sectors.
In its most recent analysis, the Treasury said Kenya’s debt remains sustainable but is exposed to high distress. It noted that the present value of debt is 63 percent of GDP, which is above the 55 percent recommended limit. Kenya now has until November 2028 to meet that threshold.
While the shilling’s recovery against foreign currencies slightly lowered the debt-to-GDP ratio from 72 percent to 65.7 percent during 2023–24, the absolute debt levels continued to grow.
Total debt rose to Sh10.58 trillion by June 2024—Sh5.41 trillion in domestic debt and Sh5.17 trillion in external debt.
The Parliamentary Budget Office has warned that the country’s fiscal position remains unstable due to revenue shortfalls and rising pressure on public spending. This fiscal squeeze has been worsened by increasing social demands and a debt-heavy budget.
Last year, Kenya faced questions about its ability to repay a $2 billion (Sh259 billion) international bond. The concerns were amplified by protests against tax hikes, forcing the government to delay planned revenue measures
. The Treasury averted a default by issuing a $1.5 billion (Sh194.2 billion) bond to buy back most of the Eurobond, then cleared the balance of $500 million in June.
Though the successful repayment restored investor confidence and led to new capital inflows, attention has now shifted to undisbursed debt.
By June 2024, Kenya had borrowed but not accessed Sh1.38 trillion, which attracted Sh1.583 billion in commitment fees. From 2016 to 2024, the country paid Sh18.9 billion in fees for loans not yet utilised.
These delays in disbursing borrowed funds undermine the expected returns from planned development projects, creating additional financial strain without the intended economic gains.
