Kenya today finds itself grappling with a mounting debt burden that now exceeds KSh 12.1 trillion, a level that has triggered increasingly urgent warnings among economists, legislators, and civil society. This debt, accumulated over recent years through domestic and external borrowing, is more than a dry statistic: it is shaping Kenya’s fiscal choices, constraining policy space, and placing pressure on public services and future growth.
The figure of KSh 12.1 trillion reflects just how aggressively borrowing has grown. In three years alone, the government is reported to have added roughly KSh 3.5 trillion in new loans. That pace of borrowing means, on average, Kenya is taking on about KSh 3.4 billion each day. Meanwhile, the country’s ability to service this debt is stressing the national budget: for the first time, domestic debt servicing alone has crossed KSh 1 trillion in a single fiscal year. In FY 2024/25, the government spent about KSh 1.05 trillion to service domestic debt—interest plus repayment of principal—representing a sharp jump from prior years.
The effects of this debt overhang are many and interwoven:
Crowding out of productive spending: As more fiscal resources are directed toward interest payments, fewer resources remain for health, education, infrastructure, or social programs. Debt servicing increasingly competes with investments that might foster long-term growth.
Reduced fiscal space and policy rigidity: A government under heavy debt pressure has less flexibility to respond to shocks (e.g. drought, pandemics, commodity price swings). It must prioritize debt obligations over discretionary spending. Legal and constitutional challenges even arise: critics argue that mortgaging much of future revenue to creditors erodes the government’s ability to meet its constitutional obligations for equitable resource allocation.
Refinancing and interest rate risk: A portion of Kenya’s debt is short-term in nature, which exposes the country to refinancing risk when markets tighten or interest rates rise. The reliance on short-term instruments magnifies vulnerability to global financial volatility.
Perception risk and credit downgrades: With debt metrics deteriorating, Kenya’s creditworthiness faces pressure. Indeed, in 2024, S&P downgraded Kenya’s sovereign rating citing a deteriorating fiscal and debt outlook. A weaker rating can raise the cost of borrowing, making future loans more expensive and compounding debt pressures.
Intergenerational burden: Today’s borrowing places obligations on future generations. The more debt grows now, the greater the burden of repayment (both interest and principal) that future governments will face.
Macroeconomic growth drag: Empirical studies of Kenya (e.g. on external debt interest) indicate that rising debt servicing can have a negative relationship with GDP growth — interest payments siphon resources that might otherwise go into productive investment.
Political and social tension: As the government looks for revenue to cope with the debt, proposals for new taxes or levies become politically contentious. In 2024, a proposed Finance Bill with heavy tax hikes sparked widespread protests (#RejectFinanceBill2024). The resulting backlash forced the government to scrap some of the tax proposals and scale back parts of the bill.
To counter these pressures, the administration has expressed a goal of reducing the debt-to-GDP ratio. Finance Minister John Mbadi has said the government targets a debt ratio of 52.8% by the 2027/28 fiscal year, down from a current level of about 58.1%. Negotiations are also underway to restructure or re-denominate certain loans—for example, talks are ongoing to convert a dollar-denominated railway loan into Chinese yuan to ease interest burden. But the path ahead is fraught: with a wall of maturities looming, persistent macroeconomic vulnerabilities, and limited room for new borrowing, Kenya’s management of its KSh 12.1 trillion debt remains a defining test of fiscal stewardship.
