NAIROBI, Kenya– Kenya’s hopes for a stronger economic rebound in 2025 could be undermined by intensifying climate shocks and persistent fiscal challenges, the Treasury has cautioned.
Treasury Cabinet Secretary John Mbadi, speaking at the launch of the FY 2026/27 budget preparation process, said the country’s growth outlook, projected at 5.3 percent, remains vulnerable to disruptions from floods, droughts, and other weather extremes. Such shocks, he noted, directly affect farming, food supply chains, and transport networks, undermining stability in key growth sectors.
“Kenya’s economic outlook faces both external and domestic risks. Further, extreme weather may negatively impact agriculture, infrastructure, and food security,” said Mbadi.
Beyond climate threats, Mbadi flagged additional headwinds ranging from turbulence in global markets to trade interruptions that could ripple through the economy.
Despite optimism built on resilient performance in agriculture, manufacturing, and services, he stressed that momentum is fragile and could easily stall.
The country’s fiscal health remains a central concern. With public debt estimated at 65–68 percent of GDP, far above the recommended 55 percent ceiling, Kenya is under pressure to find creative solutions to manage its repayment obligations.
Debt service costs are set to rise sharply, from Sh495 billion in 2025 to Sh822 billion a year later, straining already limited fiscal space.
To address this, the government is weighing options such as bond repurchases and stretching repayment timelines to ease pressure on the budget.
Even so, indicators suggest the economy retains underlying strength. Data for the first quarter of 2025 showed GDP growing 4.9 percent compared to the same period in 2024, propelled mainly by agriculture and industrial output.
Gains in these areas helped offset slower expansion in tourism-related services and information and communications technology.
