Kenya is set to allocate a record-breaking Sh1.6 trillion toward debt repayment in the 2025-26 financial year, underscoring the increasing burden of public debt on government revenue. This allocation represents 56.53% of the projected Sh2.83 trillion in ordinary revenue, leaving only Sh1.23 trillion (43.47%) for other critical government expenditures, including salaries, county allocations, and development projects.
According to the draft Division of Revenue Bill, 2025, which was tabled in Parliament last week, debt repayment is expected to be the single largest consumer of government funds. Compared to the Sh1.34 trillion allocated in the 2024-25 financial year, the latest figure marks a sharp increase of Sh265.8 billion, indicating a worsening fiscal position. In just four years, Kenya’s debt repayment obligations have nearly doubled from Sh930.35 billion in 2022-23 to the current levels.
A report by Controller of Budget Margaret Nyakang’o revealed that as of September 30, 2024, Kenya’s total public debt stood at Sh10.79 trillion. This was an increase from Sh10.58 trillion recorded at the end of June 2024. The debt comprises Sh5.19 trillion (48%) in external borrowing and Sh5.60 trillion (52%) in domestic obligations.
Despite efforts to manage fiscal deficits, the Treasury has continued to secure additional loans to plug budget shortfalls. Between September and December 2024, the government obtained 18 new loans totaling Sh68.7 billion from bilateral and commercial creditors. Most of these were secured in Chinese yuan from the China Development Bank, while others were denominated in euros from three bilateral lenders.
Treasury Cabinet Secretary John Mbadi has attributed the rising debt burden to increased expenditure on debt servicing, the weakening of the Kenyan shilling, and limited access to domestic and international financial markets. He also pointed to ongoing geopolitical tensions and global economic shocks, which have disrupted supply chains and impacted revenue collection.
However, Mbadi remains optimistic, stating that the government is committed to reducing its fiscal deficit to 4.3% of GDP in 2025-26, with a focus on improving primary surplus and debt sustainability. He noted that Kenya’s debt-to-GDP ratio has declined, from 71.9% in June 2022 to 66.7% in June 2024, aided by exchange rate appreciation and fiscal consolidation efforts.
With economic pressures mounting, the government faces a difficult balancing act—meeting debt obligations while ensuring sufficient funding for public services and development projects.
