Kenya’s public debt remains stable but with a high risk of debt distress.
This is according to the National Treasury, which says its external debt sustainability analysis debt to GDP ratio is below the 40 percent sustainability threshold.
“The debt to revenue ratio breaches the threshold of 18 percent from 2024 to 2028 due to heavy maturities during the period,” The National Treasury says in its 2025 Medium Term Debt Management Strategy document.
In the document, the Kenyan government also acknowledges that the present value of public and publicly guaranteed external debt-to-exports remains above the sustainability threshold of 180 percent through to 2029.
At the end of June 2024, Kenya’s stock or public and publicly guaranteed debt stands at Ksh10.5 trillion, 65.7 of GDP. This comprised of the domestic debt at Ksh5.4 trillion, while external debt accounted for Ksh5.1 trillion.
In this period, Treasury bonds accounted for 85.5 percent of total domestic public debt, while treasury bills gobbled 11.4 percent. Multilateral debt on the other hand accounted for 53.9 percent of external debt.
“The high proportion of multilateral debt reflects the government’s deliberate strategy of maximizing the use of concessional financing and minimizing the use of commercial loans,” notes the document.
Treasury also notes that KenGen, Kenya Ports Authority, and Kenya Airways continue to enjoy government-guaranteed debt of Kesh100.2B. This is divided into Ksh27.9B to KenGen for various power generation projects. Kenya Ports Authority enjoys a Ksh43.1B for several port development projects. National Carrier Kenya Airways, treasury says continues to soar backed by a Ksh29.1B guarantee to local banks.
“For public debt to continue on a sustainable path, the government will continue with the fiscal consolidation efforts to slow the rate of debt accumulation” notes the National Treasury.
However, this path is not devoid of challenges. Treasury says these include sovereign credit rating downgrades that negatively impacted the financial terms of new borrowings.
“Such rating downgrades may lead to increased borrowing costs, limited access to credit markets, low investor confidence, currency depreciation, and debt sustainability risks,” it adds.
Additionally, the government notes that the prevailing high interest rates both globally and locally will result in total interest payment for the financial year 2024/2025 of more than Ksh1 trillion.
Another challenge it notes is the lack of understanding of public debt management amongst major stakeholders.
“Public debt is both a highly technical and an emotive subject in the Kenyan political arena. Therefore, there is a need for a sustainable public engagement in public debt development and management,” it adds.