NAIROBI, Kenya – Government is hurtling toward a renewed public debt crisis after the National Treasury revealed a projected Sh253 billion revenue shortfall for the 2024/25 financial year, raising fresh concerns over the country’s growing reliance on debt to plug fiscal gaps.
According to documents submitted to Parliament, the Kenya Revenue Authority (KRA) collected Sh2.26 trillion in taxes by the end of April 2025—far below the Sh2.51 trillion target.
The government has now revised the full-year revenue projection to Sh2.49 trillion, down from an initial Sh2.58 trillion.
“We have prepared the Supplementary Estimates III to accommodate the changes and align the budget with the new developments,” said Treasury Cabinet Secretary John Mbadi in a memorandum to MPs.
No New Taxes, More Borrowing Ahead
With just days to the end of the financial year, Treasury officials say the revenue miss leaves the government with no choice but to turn to both domestic and external borrowing.
Mbadi attributed the shortfall to a Sh195.3 billion gap in ordinary revenue and a Sh57.7 billion underperformance in appropriation-in-aid (AiA)—internally generated revenues retained by ministries and departments.
Despite mounting public pressure over taxation, the Treasury has ruled out introducing additional levies in the short term, making borrowing the only viable option.
To plug the shortfall, the government plans to raise Sh441.8 billion from foreign lenders and Sh355.9 billion from the domestic market before June 30, pushing the fiscal deficit to Sh797.7 billion—well above the Sh761 billion cap approved by Parliament in July 2024.
Debt Burden Balloons Past Safe Limits
The aggressive borrowing strategy is expected to further strain Kenya’s debt profile.
As of December 31, 2024, Kenya’s public debt stood at Sh10.6 trillion, equivalent to 63 per cent of GDP—surpassing the 55 per cent debt sustainability threshold recommended by the IMF and World Bank.
The Treasury’s 2025 Medium-Term Debt Management Strategy shows this figure includes Sh5.2 trillion in domestic debt and Sh5.4 trillion in external liabilities.
The government has until November 1, 2028, to reduce the present value of public debt within the required 55 per cent debt-to-GDP ratio.
Earlier this year, National Treasury PS Chris Kiptoo admitted that the government had already breached its domestic borrowing limit by Sh220 billion, despite assurances of fiscal discipline.
The unfolding situation casts doubt on the government’s earlier pledge to reduce the cost and risk of debt through concessional borrowing from bilateral and multilateral development partners.
Analysts warn that the rising debt could impact sovereign credit ratings, push up interest rates, and crowd out private sector lending.
