KAKAMEGA, Kenya — Kenya narrowly avoided a sovereign debt crisis after the government successfully refinanced maturing Eurobond obligations, Treasury Cabinet Secretary John Mbadi has said.
Speaking in Kakamega, Mbadi warned that failure to act would have plunged the country into default, exposing public servants and the wider economy to severe austerity measures imposed by international lenders.
According to the CS, a default would have triggered drastic salary cuts and job losses under conditions set by institutions such as the International Monetary Fund (IMF) and the World Bank.
“For us to be bailed out by the IMF and World Bank, they would come and tell us: you have found yourself in a mess, and we have to clean you up,” Mbadi said.
“To clean up, you start with yourself. Everybody, 50pc pay cut. Some staff must go home,” he added.
Mbadi said the government benefited from unexpected developments in global financial markets, which opened a narrow window for refinancing at a time when Kenya was under intense debt pressure.
“Something no one expected happened. The market opened, and this government went to the market, got another Eurobond, and refinanced the other Eurobond,” he said.
He stressed that the outcome was driven more by timing and opportunity than by financial ingenuity.
“It was luck. It was not any economic magic for Kenya,” Mbadi said.
The CS stated that the Treasury acted deliberately to address future Eurobond obligations early, thereby reducing the risk of renewed pressure on public finances.
“That is why last February and March, because we were aware another Eurobond was coming up for payment in May 2027, we decided to deal with it early,” he said.
He added that the government applied the same approach later in the year.
“In September again, we dealt with 2028. We didn’t want to behave like the other government, which decided to leave the rest,” Mbadi said.
Mbadi revealed that Kenya had previously been flagged by the IMF as being at high risk of sovereign default, alongside several other African countries.
“IMF categorised Kenya among five other countries in Africa which were going into default. All those countries have defaulted. It is only Kenya which has not defaulted,” he said.
He warned that a default would have had far-reaching consequences beyond the financial markets, affecting livelihoods, public services and economic stability.
According to Mbadi, avoiding default preserved government payrolls, protected jobs, and shielded the economy from the harsh conditionalities typically attached to emergency bailouts.
The remarks come amid ongoing public debate over Kenya’s rising debt burden, fiscal consolidation measures, and the government’s strategy to balance debt repayment with funding for essential services and development programmes.
