Public debt is the black hole in Mbadi's budget that no one wants to confront

The public debt burden pops out like a ripened boil on the approved budget estimates by the Samuel Atandi led Budget Appropriation Committee (BAC).

The BAC submitted its final recommendations to the National Assembly (NA) on June 2. This clears the way for the Appropriation Bill 2026 that is to be tabled before the committee of the full House by Treasury Cabinet Secretary John Mbadi on June 11.

Technically and as alluded in last weeks article, we now enter into the final days of the budget making cycle for the 2026/27 fiscal year. Any other amendments can only be made through supplementary reviews once the NA approves Appropriation Bill 2026 before or by midnight on June 30.

The Public Finance Management (PFM) laws of the land do not contemplate any other date to pass a legal budget for either the national or any of the 47 county governments.

Having said that, this column picks up from where we left in last week’s article given the enormity of public interest elicited by the budget proposals.

Furthermore, this fiscal year budget is the final for President William Ruto before he faces voters next August, 10 next year.  The same applies to all 47 governors.

While there has been a raging public discourse around odious debts, with some political commentators and civil society actors arguing Kenyans should vacate such perceived dubious obligations, sovereign contracts are binding. It matters less that part of the borrowed money is stolen through corruption inflated projects or was never wired back to the consolidated fund as constitutionally required for all public revenues.

Sovereign obligations

By nature, cross-border investors go to extreme lengths to protect their capital through contract agreements. The budget documents themselves have provided detailed information on our outstanding sovereign obligations. For instance, the Programme Based Budget(PBB) submitted to the NA, that formed the basis of the BAC public participation and that now feeds into the Appropriation Bill has detailed description of the specific domestic and foreign debts under the Consolidated Fund Services (CFS).

Notably, the final allocation towards interest repayments has increased by Sh51.2 billion between February 15th when the Budget Policy Statement (BPS) was table before the NA and when the BAC report was approved this week. Even with some budget cuts to other departments, this has contributed to an increase of Sh33.3 billion in the final budget above the approved estimates under BPS, according to the BAC report.

However, the real devil is in the details that even policy experts have failed to deduce in media debates. This column does not perpetuate the odious debt narrative.

Instead, here we seek to describe the actual debt burden as it is and the macroeconomic implications. The BAC acknowledges this debt burden in passing and fails to demonstrate how perversive it is. In other sections of the report, the committee confirms stakeholder submissions on failure of Parliament to provide effective oversight over public resource management.

Piecing together approved expenditures towards debt repayment and Treasury disclosures under the CFS in the PBB, here are the chilling numbers. Debt interest expense is the single largest item in the approved budget at Sh1.254 trillion, translating to 45 per cent of projected ordinary revenues of Sh2.784 trillion for 2026/27. If we factor principal repayment on the debts, estimated at Sh1.062 trillion in the PBB, the total debt expenditure translates to 83.2 per cent of ordinary revenues.

When we factor in pension expenditure and Executive salaries and benefits drawn directly from the consolidated fund, the CFS total expenditure translates to 92 per cent of the ordinary revenues. Including other revenues (grants and planned new borrowing), the BAC estimates total available resource basket at Sh3.673 trillion. The CFS expenditure alone would still translate to 69.8 per cent.

For proper context, the debt details available in the PBB does not include obligations held by State corporations but guaranteed by Treasury (usually treated as off-balance sheet debts) or recent obligations that have been securitised like Sport Levy (Talanta City Stadium), Tourism Fund for Bomas complex or proposed securitisations of the Road Maintenance Levy and Housing Levy( trending on media) as at the time of writing this article.

Further, the disclosed debt portfolios does not include obligations under the Public Private Partnerships(PPPs) for key infrastructure projects that will be recovered through user fees/levies from the publics. Official arguments that PPPs do not have any immediate tax implications on the publics is classical utter nonsense. Who, under the heavens gives free money? More so to a sovereign State whose leaders not only have a peculiar penchant for the finest things in life, but also stash millions looted from public coffers under mattresses like we so for Nairobi County this week?  

Appearing before Parliament, Mbadi downplayed any immediate threats towards sovereign debt defaults, declaring the only pressure is from domestic obligations and a $1.5 billion Eurobond maturity due in 2031. It is true that government can print money to pay domestic debts if need be. It is for this reason that Treasury securities are presumed to be risk free for most economies.

However, printing money to settle maturing debt obligations does not come for free. It has consequent macroeconomic complications like inflation, distortions on money intermediation by the banking system and payment mechanisms across the financial value chain.

The question that no one wants to answer conclusively, however, is this: Where did/do the billions borrowed each year go to?

This question is picking momentum across various media platforms. It is the question fuelling the odious debt discourse and equally exposing complicity on the part of Parliament over the debt problem. To be fair to President Ruto, the public debt hole has been created over the last 13 years

According to public debt data available at the Central Bank, total debt stood at Sh12.3 trillion in December 2025.

Calculating backwards to the immediate three presidents, Kibaki borrowed a net of Sh1.165 trillion while for President Uhuru Kenyatta borrowed a net of Sh6.869 trillion (excluding debts like the Standard Gauge Railway held at Kenya Railway books and other off-balance sheet debts).

Between September 2022 and December 2025, President Ruto has added a net of Sh3.598 trillion to our debt portfolio (excluding securitised levies). He also shares in the blame for Uhuru’s insatiable desire for debt because he was second in command for his entire term in office.

Former President

In an earlier article not long ago, I demonstrated here that the former President Mwai Kibaki administration made about two times in contribution to the real Gross Domestic Product, despite having about one-third of the resources available to the Uhuru Kenyatta administration. While still early to assess on full impact, President Ruto’s administration seems to be only scaling up from where Uhuru Kenyatta left, a debt binge with no corresponding impact where it matters most – household incomes, employment and growth in economic activities.

More fundamentally however, the reason why the trillions borrowed are not in our local economic system is in-between the expenditure lines. Elected and senior appointed officials are the primary contractors either directly or through proxies at both the national and county governments. The rest goes to luxury hotels in foreign capitals and airlines, and multi-billion profits to foreign contractors who oil the hands of big people in government into tax haven accounts.

This is the bitter truth that we cannot run away from!