Treasury CS Mbadi says Kenya will not halt borrowing despite Sh11.2 trillion debt

Despite a growing debt crisis which now stands at Sh11.2 trillion, the government has announced that it has no plans to halt borrowing.

National Treasury Cabinet Secretary John Mbadi defended the move before the Senate Finance and Budget Committee on Tuesday, insisting that borrowing is necessary to sustain government operations.

Mombasa Senator Mohamed Faki pressed the CS to explain how the massive loans are being utilised, questioning why Kenya remains heavily indebted despite continuous borrowing.

“Kenyans are wondering why we are still sinking deeper into debt while there are lingering questions about how these funds are being spent,” Faki said.

Kenya is facing a severe fiscal crunch, worsened by the fallout from last year’s Gen Z-led protests that forced the government to withdraw the controversial 2024 Finance Bill. The move resulted in a revenue shortfall of Sh346 billion.

In response, Mbadi admitted that trust in President William Ruto’s administration remains low but assured lawmakers that measures are in place to enhance prudent use of public resources.

“We are working around the clock to ensure borrowed funds are utilised effectively because, eventually, these debts must be repaid,” he said.

Domestic borrowing

According to the fiscal policy statement for the financial year ending June 2026, the government plans to borrow Sh684.2 billion from the domestic market and Sh146.8 billion externally to bridge the budget deficit.

The shift towards domestic borrowing follows reduced funding from the International Monetary Fund (IMF), with external borrowing targets for the year ending June 2025 already revised downward to Sh168 billion.

The Kenya Revenue Authority (KRA) is also under pressure to collect Sh1.07 trillion between March and June 2025, averaging Sh267.8 billion per month—well above its current monthly collection rate of Sh175.46 billion. In the eight months from July 2024 to February 2025, KRA collected Sh1.4 trillion, representing 56.7 per cent of its revised annual target.

The CS also raised concerns over a Sh42 billion loan taken by the Treasury on August 22, 2022, just days after the general election, questioning the urgency behind the borrowing given the impending change of administration.

Kenya’s debt-to-GDP ratio stood at 65.7 per cent as of June 2024—well above the 55 per cent sustainability threshold.

Mbadi said the Auditor-General’s office had been engaged to help craft a debt reduction strategy.

“We have asked all ministries to redirect resources to priority areas to avoid non-expenditure of government funds, particularly loans. Currently, we have Sh1.3 trillion allocated to various functions but not yet disbursed,” Mbadi said.

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Kakamega Senator Boni Khalwale challenged Mbadi to explain why Sh29.9 billion meant for devolved functions had been retained by the national government. The CS sidestepped the question, saying he would respond once he reviewed a report on the matter.

On the standoff between governors and MPs over the Road Maintenance Levy Fund, Mbadi called for a political solution to prevent disruptions in county service delivery.

“This issue must be resolved to ensure service delivery is not affected. I urge both parties to find a solution so that devolution can function effectively,” he said.

The Treasury boss also apologised to the committee for failing to attend two previous sittings, citing prior engagements with IMF officials and a Cabinet meeting.

“It was never my intention to undermine the role of the Senate in the budget-making process. Having served as an MP for many years, I fully understand and respect the crucial role of this House,” Mbadi said.