Public debt soars as Sh1.6tr spent on servicing debt

Kenya’s debt burden continues to swell with the latest report by the Controller of Budget (CoB) showing the National Treasury spent Sh1.6 trillion to service its loans in the 2024/2025 financial year.

The total public debt service comprising redemptions, interest and other charges, represented a significant escalation from previous years and consumed over 70 per cent of the country’s ordinary revenue.

This is according to the annual public debt management report presented to the National Assembly Committee on Privatisation and Public Debt, by Deputy Controller of Budget, Stephen Masha.

Similarly, the report said that domestic interest payments dominated at Sh699.5 billion, including Sh678.3 billion on Treasury bonds and bills held by commercial banks and non-banks, while external debt service totaled Sh540.1 billion, comprising Sh332.7 billion in principal repayments and Sh205.3 billion in interest and charges.

According to the CoB, the total gross public debt stock for Financial Year 2024/25 is estimated at Sh11.7 trillion (67.8 per cent of GDP), an increase from Sh10.5 trillion (66.9 per cent of GDP) in Financial Year 2023/24, driven by fiscal deficits and currency depreciation pressures, though fiscal consolidation efforts are projected to moderate growth.

The debt is composed of domestic debt at Sh6.3 trillion (54 per cent) and external debt at Sh5.4 trillion (46 per cent). “Domestic debt has grown nominally from Sh5.4 trillion in FY2023/24, reflecting an increased reliance on Treasury bonds and bills. Meanwhile, external debt rose from Sh5.1 trillion due to multilateral inflows,” CoB documents have shown.

“When domestic debt grows faster, then it is susceptible to immediate interest rate changes and it is costly. Domestic debt in most cases is a lot more costly because it is subject to foreign exchange but at the same time when we borrow a lot domestically, we tend to crowd out the other sectors,” Masha explained.

At the same time, the CoB’s analysis of county government debt and pending bills shows unpaid bills to suppliers and contractors, outstanding salaries, and, in some cases, loans secured with approval from the national government.

Unlike the national government, CoB says that counties have limited borrowing powers and must seek approval from the National Treasury and Parliament before incurring debt and despite these restrictions, many counties have accumulated significant trade arrears.

“In Financial Year 2024/25, County Governments reported outstanding pending bills totaling Sh183.03 billion as of June 30, 2025. This amount includes Sh130.8 billion for recurrent activities and Sh52.23 billion for development activities. The pending bills for the County Executive as of this date were Sh177.95 billion, while the pending bills for the Assemblies amounted to Sh5.07 billion,” the CoB explained.

During the financial year 2024/25, the Government raised a total of Sh1.36 trillion in new gross financing against a revised target of Sh1.66trillion, as contained in the 2024 Annual Borrowing Plan.

According to Controller of Budget, this represents an achievement of 82 per cent of the gross borrowing requirement of external financing at Sh445.6 billion (32.5 per cent of total new borrowing) and domestic financing at Sh924.1 billion (67.5 per cent of total new borrowing).

The CoB cited implications of County Government Debt to include stalled projects, where unpaid contractors halt work on crucial infrastructure and service delivery projects.

The CoB has since called for the need to enhance fiscal discipline by ensuring that expenditures are incurred strictly within approved budgets and available cash flows, both at the national and county levels.