NAIROBI, Kenya – Kenya’s public debt servicing costs surged by Sh68.7 billion in the last six months of 2024, driven primarily by soaring domestic interest rates, a new report by the Controller of Budget (COB) reveals.
The latest data shows that total public debt service payments reached Sh666.3 billion between July and December 2024, compared to Sh597.6 billion in the same period the previous year.
The increase has been largely attributed to a sharp rise in interest payments on domestic debt, signaling mounting financial pressure on the Treasury.
The COB report highlights that domestic debt servicing accounted for the bulk of the increase, with payments on Treasury bills and bonds soaring to Sh432.83 billion, up from Sh355.17 billion a year earlier.
Even more concerning is the 2.6-fold surge in domestic interest payments, which jumped to Sh325.7 billion, making it the single largest contributor to the spike in debt costs.
“There was an overall growth in Consolidated Fund Services (CFS) payments over the period, mainly due to increased interest payments on domestic debt (excluding overdraft) from Sh125.08 billion in the first half of 2023/24 to Sh325.72 billion in 2024/25,” the COB report states.
The surge in servicing costs comes as Kenya’s domestic debt stock expanded significantly.
The total domestic debt grew from Sh5.41 trillion in June 2024 to Sh5.87 trillion by December 2024, reflecting the government’s increasing reliance on local borrowing to meet its financial obligations.
During this period, the government borrowed Sh487.14 billion in new domestic loans while repaying only Sh27.6 billion in principal.
As of December 31, Kenya’s total public debt stood at Sh10.93 trillion, with domestic lenders holding 54% (Sh5.87 trillion) of the debt and external lenders 46% (Sh5.06 trillion).
While external debt saw a marginal 0.2% decline—partly due to the strengthening of the Kenyan shilling—domestic debt grew by 8% as the government ramped up local borrowing.
For the current fiscal year ending June 2025, the government has allocated a staggering Sh1.91 trillion for debt repayments.
- Domestic debt payments are projected to reach Sh1.32 trillion, with interest payments alone accounting for Sh749.97 billion.
- External debt payments are expected to total Sh590.6 billion, of which Sh259.9 billion will go toward interest.
Between July and December 2024, the government settled Sh231.29 billion in external debts, including Sh100.89 billion in interest, Sh553.67 million in commitment fees, and Sh977.5 million in penalties.
The sharp rise in domestic interest payments underscores the financial strain of borrowing locally, where interest rates remain elevated.
With a significant portion of revenue now being channeled toward debt repayments, the government faces tough choices in balancing its fiscal priorities.
