A Tale of Two Strategies

NAIROBI, Kenya – The Kenyan government's public debt surged to Sh12.05 trillion by the end of September 2025, a move that starkly contrasts with its declared policy of leveraging private sector financing for major infrastructure projects. This escalating borrowing binge is creating a complex economic picture, leaving citizens and analysts questioning the sustainability of the country's fiscal path. While the state champions Public-Private Partnerships (PPPs) as the solution to infrastructure deficits without overburdening the exchequer, the relentless accumulation of public debt tells a different story.

The Soaring Debt Mountain

Recent data from the National Treasury paints a sobering picture. As of September 2025, the total public and publicly guaranteed debt stood at 67.3% of the Gross Domestic Product (GDP). This is significantly higher than the 50% threshold recommended for developing countries by the International Monetary Fund (IMF). The debt is increasingly dominated by domestic borrowing, which accounted for 55.3% (Sh6.66 trillion) of the total debt by September 2025. This reliance on the domestic market has been attributed to constrained access to external financing and is a significant shift from the recommended 50:50 split between domestic and external borrowing.

The Controller of Budget, Dr. Margaret Nyakang'o, has raised concerns over this deviation, highlighting the rapidly growing debt burden. In the 2024/25 fiscal year, the government's debt service payments amounted to a staggering Sh1.72 trillion. Projections show that these costs are expected to rise, consuming a substantial portion of national revenue and crowding out other essential public services.

The PPP Promise

In parallel to this borrowing spree, the government has been actively promoting PPPs as a fiscally responsible way to fund development. The state aims to mobilize Sh70 billion in the 2025/26 fiscal year through 32 PPP projects in key sectors like transport, energy, water, and housing. Notable PPP projects in the pipeline include the Galana Kulalu Food Security Project, the Sabaki Water Carrier Project, and several power transmission lines. The Nairobi Expressway and the Lake Turkana Wind Power project are often cited as successful examples of this model.

The push for PPPs aligns with advice from international partners like the IMF and the World Bank to adopt more transparent and accountable financing mechanisms. President William Ruto has also announced plans to establish a sovereign wealth fund and an infrastructure fund, aiming to mobilize domestic resources and reduce reliance on external borrowing.

An Uncomfortable Irony

The central irony lies in the government's simultaneous pursuit of massive public borrowing and private sector financing. While PPPs are intended to reduce the need for state borrowing, the reality shows both avenues are being pursued aggressively. This dual approach raises critical questions for Kenyans. Is the government's right hand aware of what its left hand is doing? Does the continued borrowing indicate a lack of confidence in the PPP model's ability to deliver on its promise, or are the country's financing needs simply too vast for one approach alone?

This strategy has significant implications for the Kenyan taxpayer. The growing debt requires a larger portion of the national budget for servicing, potentially leading to reduced spending on essential services like healthcare and education, or the introduction of new taxes. While PPPs can deliver much-needed infrastructure, they often come with their own costs for citizens, such as toll fees for roads.

The Path Forward

As Kenya navigates this complex financial landscape, the need for a clear and coherent long-term fiscal strategy is more critical than ever. The government faces the delicate task of balancing its ambitious development agenda with the imperative of maintaining debt sustainability. The success of this balancing act will determine the economic well-being of Kenyans for years to come. The administration's ability to rein in borrowing, effectively implement its PPP pipeline, and ensure transparent management of public finances will be the ultimate test of its economic stewardship. FURTHER INVESTIGATION REQUIRED.