Kenya's debt nears Sh13 trillion mark as repayment woes mount

Kenya's public debt is racing towards a record Sh13 trillion.[File, Standard]

The country’s public debt is racing towards a record Sh13 trillion, official government data shows, even as President William Ruto’s administration doubles down on domestic borrowing following aggressive forays into international markets.

With just 15 months to go before general elections, economists and the Controller of Budget have separately warned that ballooning debt repayments, which already consume nearly 80 per cent of tax revenues, are crowding out the private sector and raising the spectre of a full-blown debt service crisis. 

The State’s own latest figures confirm a government hooked on costly local loans, even as the International Monetary Fund (IMF) deal remains frozen over the true numbers of Kenya’s public debt and repayment fears push the country closer to the fiscal brink.

Data from the Central Bank of Kenya (CBK) shows gross domestic debt stood at Sh7.24 trillion as of May 15, up from Sh6.33 trillion in June 2025. Combined with external debt of Sh5.78 billion, total public debt has reached about Sh12.84 trillion, a stone’s throw from the record Sh13 trillion mark.

The rapid accumulation comes as talks with the IMF remain frozen, with the Ruto government resisting the global lender’s demands for greater transparency over potentially “hidden” debt, including pending bills estimated at Sh684 billion and securitised infrastructure loans.

The government’s own data, meanwhile, paints a picture of a government increasingly reliant on domestic markets at the expense of Kenyans in search of affordable credit for education, business or household needs. 

Commercial banks now hold 36.1 per cent of government domestic debt, according to CBK data, a concentration that economists say is starving the private sector of credit.

Lending rates to businesses have climbed above 14.8 per cent, even as CBK’s policy signals remain unchanged.

CBK data shows that Treasury bill auctions were oversubscribed by 125.2 per cent in the week ending May 21, with bids totalling Sh30 billion against an advertised Sh24 billion.

Interest rates on 91-day and 364-day bills edged higher, reflecting mounting demand pressure. “Every shilling lent to the government is a shilling not available for a small business to expand or hire workers,” a senior banker at a tier one lender, speaking to The Standard anonymously, said. “With elections approaching, this problem will only get worse.”

 CBK data shows excess reserves at commercial banks averaged just Sh6 billion above the cash reserve ratio requirement, a thin buffer that suggests limited room for private sector lending to expand.

The IMF has made clear that any new financing programme depends on Kenya classifying securitised infrastructure funding as public debt and expanding reporting to cover all State entities, raising fears over the true level of Kenya’s public debt.

The Ruto government has resisted this, arguing the structures pose no fiscal risk. The impasse has pushed potential talks into 2027, an election year, government officials acknowledge privately.

The Iran-US conflict has driven crude prices higher, with Murban oil rising to $97.51 (Sh12,676) per barrel on May 21 from $94.84 (Sh12,329) a week earlier, according to CBK data. As a net oil importer, Kenya’s current account is under pressure, and CBK last week cut its 2026 growth forecast to 5.3 per cent.

Compounding the fiscal squeeze, the Kenya Revenue Authority (KRA) collected Sh84 billion less than planned in the first nine months of the financial year, official data shows. Between July and March, KRA took in Sh2.038 trillion against a target of Sh2.122 trillion, a performance rate of just 96.1 per cent.

To meet its full-year target of Sh2.97 trillion by June 30, KRA must raise Sh932 billion in the final quarter, equivalent to Sh10.24 billion every single day. Analysts view this as near-impossible while household purchasing power remains subdued following recent price hikes.

“The economy is slowing, demand is muted, and yet the government’s revenue needs are accelerating,” said the banker. “That leaves only one option: borrow more.”

With the August 2027 vote now less than 15 months away, President Ruto has stepped up on a series of development tours in vote-rich regions, at the Coast, among other regions, promising new roads, clean water, and markets. But delivering on those pledges requires cash that the government simply does not have, analysts warn.

Privatisation proceeds from the sale of a 65 per cent stake in Kenya Pipeline Company netted Sh103.45 billion in March, equivalent to barely two months of debt-service payments. A planned sale of a 15 per cent stake in Safaricom may not close until late 2026. The Controller of Budget, Margaret Nyakang’o, has previously issued stark warnings about a looming debt repayment crisis, telling Members of Parliament that Kenya’s fiscal trajectory has become deeply unsustainable.