Kenya's public debt has escalated to KSh 11.81 trillion as of June 2025, according to recent disclosures by National Treasury Cabinet Secretary John Mbadi. This figure represents 67.8% of the country's Gross Domestic Product (GDP). The government's borrowing spree saw it contract KSh 95.5 billion in new loans within a five-month period, from May 1st to September 30th, 2025.

The significant increase in public debt has ignited a national conversation among economists and policymakers regarding its long-term implications for Kenya's economic stability and the provision of critical public services. Experts at the 2025 Economic Rescue Conference in Nairobi have called for urgent reforms in debt management and greater fiscal accountability.

Historical and Political Context

Kenya's public debt has been on an upward trajectory for several years. Data from the Central Bank of Kenya (CBK) indicates that the total public debt stood at KSh 10.6 trillion as of June 2024, an increase from KSh 10.3 trillion in June 2023. The debt-to-GDP ratio has consistently exceeded the International Monetary Fund's (IMF) recommended threshold of 50% for developing countries, reaching 70% in June 2024. This rapid accumulation of debt has been largely driven by an expansionary fiscal policy focused on infrastructural development and persistent fiscal deficits.

Previous administrations have also grappled with rising debt. For instance, public debt grew from KSh 2.1 trillion in 2013 to KSh 8.2 trillion by the end of 2021, equivalent to about 68% of GDP. The current government, which assumed office in October 2022, had initially pledged to curb public borrowing. However, borrowing has continued, with an average of KSh 6 billion being borrowed weekly over a four-month period.

Laws, Policy, and Governance

The National Treasury, under the Public Finance Management (PFM) Act 2012, is mandated to prepare annual public debt management reports to promote transparency and accountability. In response to the escalating debt, the Treasury has initiated a liability management strategy. This strategy aims to refinance high-cost obligations, extend debt maturities, and increase the uptake of concessional financing to improve debt sustainability. The 2025 Medium-Term Debt Management Strategy outlines a plan to source 75% of future borrowing from the domestic market and 25% from external concessional loans.

The government also aims to reduce the fiscal deficit from 5.7% of GDP in the 2024/25 fiscal year to 4.8% in 2025/26 as part of its fiscal consolidation efforts. This involves streamlining public spending and implementing cost-cutting measures, including reviewing expenditures across ministries and dissolving state corporations with overlapping functions.

Stakeholders and Testimonies

Treasury Cabinet Secretary John Mbadi, speaking on Tuesday, October 7, 2025, assured the public that Kenya continues to meet its debt obligations on time and is committed to long-term sustainability. He emphasized that sound and prudent debt management remains a central pillar of his stewardship at the National Treasury.

However, civil society organizations like the Okoa Uchumi Initiative have raised alarms, reporting that 70% of the Kenyan government's revenue is currently allocated to public debt repayment. This high allocation to debt servicing is a significant concern, as it diverts funds from essential public services such as health, education, and social protection.

Evidence and Data

As of June 2025, Kenya's public debt stands at KSh 11.81 trillion. Of this, KSh 6.33 trillion constitutes domestic obligations, while KSh 5.48 trillion is external debt. Major external creditors include the World Bank, African Development Bank (AfDB), China, and Eurobond holders. During the 2024/25 fiscal year, the government spent KSh 1.72 trillion on debt service payments, with KSh 1.14 trillion going to domestic lenders and KSh 579 billion to external creditors.

The debt-to-GDP ratio was 67.8% as of June 2025. In present value terms, the debt is 63.7% of GDP, which is assessed as sustainable but with a heightened risk of distress. Interest payments alone are projected to surpass KSh 1 trillion in the 2025/26 fiscal year.

Risks and Implications

The escalating public debt poses several risks to the Kenyan economy. High debt servicing costs crowd out private sector investment and reduce the fiscal space available for development projects and essential public services. Studies have shown that domestic borrowing, particularly through instruments like Treasury Bills and Bonds, can negatively impact economic growth. The country's elevated risk of debt distress is further evidenced by a high debt service to revenue ratio, which stood at 67.1% as of May 2024.

Credit rating agencies like Fitch, Moody's, and S&P Global have maintained Kenya's credit outlook at negative, leading to higher borrowing costs in the international market. A weaker Kenyan Shilling against foreign currencies also increases the burden of external debt.

Unknowns and Controversies

While the National Treasury is legally required to publish monthly public debt bulletins, information on loan contracts remains scarce, raising concerns about transparency. The full details of collateral put up against significant loans, such as the Standard Gauge Railway (SGR) deal, have not been fully disclosed, hindering public scrutiny and accountability.

Timeline and Next Steps

The government's 2025 Medium-Term Debt Management Strategy aims to reduce the public debt to 55% of GDP by 2028. This will involve continued fiscal consolidation, liability management operations, and a focus on concessional borrowing.

What to Watch

Observers will be closely watching the implementation of the government's fiscal consolidation plan and its impact on the debt-to-GDP ratio. The effectiveness of the liability management strategy in reducing borrowing costs and extending maturities will be crucial. Additionally, the transparency of future loan agreements and the government's ability to increase revenue collection without stifling economic growth will be key indicators of progress.