Kenya’s public debt hits Sh11.81 trillion as Treasury pledges prudent fiscal management
Mbadi disclosed that in present value terms, the public debt amounts to 63.7 per cent of GDP, a level assessed as sustainable though accompanied by a heightened risk of distress.
Kenya’s public debt now stands at Sh11.81 trillion, representing 67.8 per cent of the Gross Domestic Product (GDP) as of June 2025.
Speaking on Tuesday during a briefing with financial journalists, Treasury Cabinet Secretary John Mbadi said that Sh6.33 trillion accounts for domestic obligations, while Sh5.48 trillion comprises external debt owed to major creditors, including the World Bank, the African Development Bank (AfDB), China, and Eurobond holders.
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Mbadi disclosed that in present value terms, the public debt amounts to 63.7 per cent of GDP, a level assessed as sustainable though accompanied by a heightened risk of distress.
During the 2024/25 fiscal year, the government effected Sh1.72 trillion in debt service payments, comprising Sh1.14 trillion to domestic lenders and Sh579 billion to external creditors.
To address existing debt vulnerabilities, Mbadi stated that the National Treasury has initiated a series of liability management operations aimed at enhancing sustainability metrics. These include refinancing high-cost obligations, extending debt maturities and increasing the uptake of concessional financing.
Mbadi reaffirmed that maintaining sound and prudent debt management remains a key priority of his leadership at the Treasury, anchored on protecting essential public services, restoring fiscal space for growth and safeguarding Kenya’s economic sovereignty.
“Sound and prudent debt management remains the central pillar of my stewardship at the National Treasury, anchored on safeguarding essential public services, restoring fiscal space to spur growth and fortifying Kenya’s economic sovereignty,” he said.
Under the 2025 Medium-Term Debt Management Strategy, Mbadi said the government seeks to lengthen the maturity profile of public debt, minimise exposure to interest rate and exchange rate fluctuations and promote intergenerational equity. He added that 25 per cent of borrowing will come from external sources, while 75 per cent will be raised from the domestic market.
The CS further revealed that high global and domestic interest rates have significantly increased the cost of debt service, with interest payments in the 2025/26 fiscal year projected to surpass Sh1 trillion. Despite this, he assured that Kenya continues to meet all its debt obligations on time and remains committed to ensuring long-term sustainability.
“We are implementing a robust strategy that guarantees Kenya meets its debt obligations without compromising critical public services,” he said.
As part of its fiscal consolidation plan, the government targets to lower public debt to 55 per cent of GDP by 2028. Key measures include managing maturing Eurobonds, slowing the uptake of costly commercial loans and pursuing debt-for-development swaps.
“We will diversify our funding sources by issuing bonds in Asian and Middle Eastern markets while prioritising concessional loans from multilateral and bilateral institutions,” Mbadi added.
The Cabinet Secretary also announced that Kenya is actively pursuing a new funded programme with the International Monetary Fund (IMF) to secure affordable financing and strengthen external oversight of its economic strategy. Discussions for the new IMF programme began in September 2025, with IMF staff led by Mission Chief Haimanot Teferra visiting Nairobi to hold talks with Treasury officials.
Mbadi clarified that the engagement with the IMF is a strategic move to enhance fiscal credibility rather than a sign of economic distress.
“We are not engaging the IMF because we are in crisis, but because we want to move towards an investment-grade credit rating that will reduce our future borrowing costs,” he said.
He added that as a member of the IMF and World Bank, Kenya contributes annual subscriptions and should benefit from concessional loans and technical support offered by these institutions.
“You also need someone to continuously engage with you, to look at you and tell you that we think you are losing track,” he said.
Acknowledging public concern over the conditions tied to IMF support, Mbadi assured Kenyans that the government will safeguard citizens from harsh measures.
“I guarantee that the conditions we agree with the IMF are not putting pressure on ordinary Kenyans, but instead helping them receive better services,” he promised.
The IMF, which ended its 2021 Extended Credit Facility and Extended Fund Facility arrangement with Kenya in March 2025, has reaffirmed its commitment to work with the country in bolstering fiscal stability and advancing economic reforms.
The Treasury also announced plans to engage financial journalists monthly to enhance fiscal transparency, improve public understanding of debt dynamics and foster informed discourse on the country’s economic trajectory.
“We will be holding monthly engagements with financial journalists to strengthen fiscal transparency and promote a well-informed public discourse on Kenya’s debt and economic trajectory,” Mbadi said.
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