NAIROBI, Kenya – Kenya has veered off its 2024/25 Medium-Term Debt Management Strategy (MTDS), sharply increasing domestic borrowing and exposing the economy to heightened refinancing and debt distress risks.
The latest budget implementation review by the Office of the Controller of Budget (CoB) shows the country’s total public debt stood at Sh11.73 trillion as of June 30, 2025.
Of this, Sh6.33 trillion was sourced locally, while Sh5.40 trillion came from external creditors.
The figures reflect a 17 per cent jump in domestic debt from the previous year, far above the MTDS’s recommended 45:55 ratio of domestic to external borrowing. Instead, Kenya’s ratio stood at 54:46, reversing its own fiscal strategy.
The MTDS, which covers the period 2024/25–2026/27, had recommended reducing short-term debt, lengthening maturity profiles, and prioritising concessional external loans to cut costs and risks.
However, the government’s financing pattern has tilted heavily towards short-term Treasury bills, pushing up interest costs and triggering refinancing concerns.
“The total domestic debt service was Sh992.39 billion, comprising principal repayments of Sh360.09 billion and interest payments of Sh632.30 billion,” Controller of Budget Margaret Nyakang’o noted.
According to the report, interest payments surged to Sh632.3 billion, nearly double the Sh360.1 billion spent on principal repayments.
This pushed domestic debt service obligations to Sh1.05 trillion, up from Sh830 billion the previous year.
Nyakang’o warned that reliance on short-term instruments such as 91-day, 182-day, and 364-day Treasury bills has made the government more vulnerable to rollovers at higher costs.
Domestic debt servicing accounted for the lion’s share of Kenya’s total debt repayments in FY 2024/25, outpacing external obligations.
Of the Sh1.7 trillion spent on debt, Sh992.4 billion went to domestic lenders, underscoring the shift in borrowing patterns.
Economists warn the trend could deepen fiscal stress and squeeze development financing, as rising interest obligations continue to outpace efforts to reduce overall debt.
