Over half of Kenya’s revenue to be consumed by debt repayment, Treasury report says
Constitutional commissions such as the National Land Commission, the Salaries and Remuneration Commission, and the Commission on Revenue Allocation will receive Sh391.10 billion.
The government is staring at a deepening cash crisis in the next financial year as debt repayment takes up the biggest share of state revenue.
According to the latest National Treasury report, Sh1.6 trillion has been allocated for debt repayment in the 2025-26 financial year the highest in the country's history.
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The amount represents 56.53 per cent of the projected Sh2.83 trillion ordinary revenue, leaving only Sh1.23 trillion for other expenses, including salaries and county allocations.
The figures are detailed in the draft Division of Revenue Bill, 2025, which was tabled in Parliament last week.
Treasury has proposed allocating Sh417.96 billion to counties, including an equitable share of Sh405.06 billion and an additional Sh12.89 billion.
Meanwhile, constitutional commissions such as the National Land Commission, the Salaries and Remuneration Commission, and the Commission on Revenue Allocation will receive Sh391.10 billion.
"In the financial year 2025-26, the allocation for payment of public debt-related costs is expected to increase from Sh1.34 trillion allocated in 2024-25 to Sh1.60 trillion," the Bill states. This marks an increase of Sh265.8 billion from the previous year.
Government records show that in the Financial Year 2022-2023, Sh930.35 billion was spent on debt repayment, a drop from Sh1.17 trillion in FY 2021-2022.
The latest report by Controller of Budget Margaret Nyakang'o indicates that as of September 30, 2024, Kenya's debt stock had risen to Sh10.79 trillion. External debt accounts for Sh5.19 trillion (48 per cent), while domestic debt stands at Sh5.60 trillion (52 per cent).
"The public debt stock increased by two per cent from Sh10.58 trillion as of June 30, 2024, to Sh10.79 trillion by September 30, 2024. External debt grew by 0.3 per cent, while domestic debt recorded a four per cent increase due to more borrowing in the local market," the report states.
Despite the rising debt, the Treasury has continued borrowing to bridge the budget deficit.
18 new loans
A report tabled in Parliament last week shows that between September and December last year, the government secured 18 new loans from bilateral and commercial lenders totalling Sh68.7 billion.
Of these, three were denominated in euros from bilateral lenders, while the remaining 15 were in Chinese yuan, obtained from the China Development Bank.
Treasury Cabinet Secretary John Mbadi has attributed the financial strain to increased debt repayment costs and a weakened shilling.
"[There is] low revenue collection attributed to the ongoing geopolitical shocks. The global economy is on a recovery path from the negative shocks in supply chains," Mbadi said.
Despite the financial difficulties, he maintained that the government remains committed to reducing its fiscal deficit to 4.3 per cent of GDP in 2025-26.
"This is designated to slow down the accumulation of public debt, improve primary surplus, and achieve sustainability," he added.
Treasury data shows that Kenya's gross domestic debt-to-GDP ratio has declined from 71.9 per cent in June 2022 to 66.7 per cent in June last year.
"The present value of the debt-to-GDP ratio dropped from 68.7 per cent in 2023 to 63 per cent in 2024, thanks to exchange rate appreciation and fiscal consolidation efforts," Mbadi said.
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