Kenya’s debt burden has crossed a new red line. The country’s public debt reached a record KSh 11.51 trillion as of May 2025, according to data from the National Treasury and the Central Bank of Kenya (CBK).
With domestic borrowing accelerating and short-term debt soaring, the numbers highlight a worrying trend: Kenya is sinking deeper into a debt trap while revenues stagnate.
Treasury Bills are growing faster than long-term bonds, pushing up interest payments. Meanwhile, the depreciating shilling is making foreign debt more expensive, further squeezing the country’s already strained finances.
Kenya’s Public Debt Rises Fast With Domestic Borrowing in the Lead
Kenya’s public debt is now one of the highest in Sub-Saharan Africa. The latest Treasury report confirms that most of the recent debt growth came from domestic sources. By July 2025, domestic debt stood at KSh 6.31 trillion—up from KSh 6.20 trillion just two months earlier.
Short-term Treasury Bills (T-Bills) have grown at a record pace. As of July 4, 2025, the T-Bills stock hit KSh 1.036 trillion, breaking the previous all-time high set in April 2019.
These T-Bills now form 16.85% of total domestic securities, up sharply from 11.75% in 2024. This shows that the government is relying more on short-term debt, which matures faster and needs to be refinanced quickly—putting more pressure on cash flows.
The July 21, 2025 auction attracted over KSh 24 billion. The yields were high: 8.13% for the 91-day, 8.43% for the 182-day, and 9.73% for the 364-day bills. These rates reflect the risk investors see in lending to the government even for short periods.
Long-term Treasury Bonds (T-Bonds), which are more stable, also increased. Their total value rose to KSh 5.11 trillion in July 2025 from KSh 4.63 trillion in June 2024.
This 10.4% annual jump means T-Bonds still form the backbone of domestic debt, accounting for 83.1% of the total, although this is down from 88.2% a year ago due to the faster T-Bill growth.
The CBK recently held two bond reopenings within just 14 days—raising KSh 71.64 billion in late June and another KSh 66.65 billion on July 14. These included the FXD1/2018/020 (20-year) and FXD1/2018/025 (25-year) papers, offering average yields of 13.90% and 14.35%.
This signals that institutional investors are still hungry for long-term instruments, helping the Treasury in its KSh 635 billion net domestic borrowing plan for FY2025/26.
External Borrowing Adds More Pressure Due to Shilling Decline
Kenya’s external debt has also ballooned in local currency terms, driven by a weaker shilling. By May 2025, foreign debt stood at USD 41.07 billion—up from USD 39.77 billion in June 2024. But due to the shilling’s depreciation, this amount converted to KSh 5.31 trillion from KSh 5.05 trillion.
This means that even when dollar-denominated debt barely grows, the cost of repaying it in shillings keeps rising. This trend adds more weight to the government’s debt load and limits room for spending on development or social services.
While some of this external debt is on concessional terms, a growing portion is owed to commercial lenders and multilateral agencies under tighter conditions. That makes repayment tougher in the face of forex shocks or export revenue shortfalls.
Kenya’s current account deficit and rising import bill make this risk even more real. A weaker shilling makes it costlier to service external loans, especially when dollar inflows from tourism, remittances, or exports fall short.
Debt Servicing Swallows Budget While Ratings Stay Weak
The biggest sign of Kenya’s public debt crisis is in its ballooning debt servicing costs. From July 2024 to May 2025, the government spent KSh 1.448 trillion on repaying debt. More than KSh 1 trillion went into interest payments alone, which shows how much borrowing is eating into available funds.
The debt service-to-revenue ratio now stands at a worrying 69–70%, far above the International Monetary Fund’s safe limit of 30% for developing economies. This leaves little room for growth investments, wages, or public services—forcing the government to borrow even more just to stay afloat.
Kenya’s credit rating outlook remains fragile. Moody’s has maintained a Caa1 Positive rating since January 2025. Fitch has stuck with a B− Stable grade, while S&P Global continues to rate Kenya at B− with no clear forward outlook. These ratings reflect investor concern over Kenya’s ability to manage its debt sustainably.
Public debt is rising too fast, with short-term borrowing outpacing long-term planning. Domestic markets are feeling the pressure, and the weakening shilling is making foreign debt more expensive.
As debt servicing eats up nearly 70% of revenues, Kenya risks entering a debt spiral that limits future growth. The Treasury must rethink its borrowing strategy, deepen tax collection reforms, and cut wasteful spending. Without urgent intervention, the country’s economic future may be mortgaged beyond repair.
