Nyakang'o flags increased Sh13tr public debt, directs treasury to reduce borrowing

Controller of Budget (CoB) Dr Margaret Nyakang’o noted that commitment fees increase public expenditure during her submissions before the Public Debt and Privatisation Committee at Bunge Towers, Parliament, Nairobi, on August 18, 2026. [Elvis Ogina, Standard]

The Controller of Budget Margaret Nyakang'o has raised a red flag over the surging public debt, which currently stands at Sh13.01 trillion, and called on the National Treasury to urgently reduce borrowing to lower the country’s debt stock.

In her report for the 2025/2026 financial year, Nyakang'o highlighted that as a result of the debt stock, the debt-to-GDP ratio had risen to 68.5 per cent against the 55 per cent limit set by law. She also highlighted that the rising debt, persistent budget deficits, high debt-service costs and growing refinancing needs were putting increased pressure on public finances.

According to the report, as of 30 June 2026, public debt stock stood at Sh13.01 trillion, up from Sh11.80 trillion as of 30 June, 2025. It also explained that although the debt-to-GDP ratio declined from approximately 68.8 per cent in FY 2024/25 to 68.50 per cent in FY 2025/26, the level of indebtedness remains above the statutory 55 per cent debt ceiling.

Section 50(2A) of the Public Finance Management Act provides that borrowing by the National Government shall not exceed 55 per cent of Gross Domestic Product (GDP) in present value terms. Further, section 50(2C) requires the Cabinet Secretary to take measures within five years of the coming into force of subsections (2A) and (2B) to ensure that the National Government’s borrowing complies with the prescribed threshold. The Act, however, provides for limited exceptional circumstances under which the threshold may be exceeded, subject to the conditions prescribed by law.

Nyakango is now calling on the National Treasury to strengthen and operationalise the debt-reduction strategy by accelerating fiscal consolidation through the progressive reduction of the fiscal deficit, ensuring that annual borrowing requirements are consistent with the targeted debt trajectory, strengthening domestic revenue mobilisation, and addressing persistent revenue shortfalls.

 “This will reduce reliance on borrowing to finance the budget and ensure the annual debt-ratio milestones towards 55 per cent of the GDP are monitored,” reads the report.

Nyakango also raised concerns over the Government’s liability management operations involving the buyback/partial redemption of existing International Sovereign Bonds (ISBs), financed in part by new longer-term International Sovereign Bonds funded under Article 223 of the Constitution.

She warned that while liability management operations can reduce refinancing risk and extend debt maturities, they may also increase future debt-service costs when replacement debt carries comparable or higher interest rates and transaction costs.

The Controller of Budget subsequently challenged the Government, through the Public Debt Management Office, to demonstrate the overall cost-effectiveness and fiscal benefit of each buyback operation, beyond maturity extension and refinancing considerations.

“The ISB’s buybacks should be evaluated during the budget-planning stage to minimise reliance on Article 223 of the Constitution and enhance budget credibility,” adds the report.

The National Government Budget Implementation Review Report comes just a month after the Controller of Budget appeared before a National Assembly committee where she warned that the government’s continued borrowing beyond approved ceilings affected the country’s fiscal sustainability.

Before the Public Petitions Committee, she decried that the situation had created a cycle where the government is forced to continue borrowing simply to sustain its operations.

"The total public debt stands at Sh13 trillion. 60 per cent is domestic debt and 40 per cent is external debt. The impact is that 71 per cent of the revenue collected goes to loan repayment, leaving us with only 29 per cent to finance government operations," she stated.

Adding, “We cannot survive. The impact is that we will continue borrowing for us to survive. We can mitigate it, but how we do that is upon us to figure out."

She also accused counties of diverting funds approved by her office to projects and expenditures that were not originally requisitioned.