Government debt repayments jump by Sh68.7bn as interest costs soar
The sharp rise in domestic interest payments highlights the financial strain of borrowing from the local market as the government navigates rising debt obligations amid fiscal constraints.
The cost of servicing Kenya’s public debt rose by Sh68.7 billion over the six months leading to December 2024, driven largely by soaring domestic interest rates.
The Controller of Budget (COB) reports that this increase saw total public debt service payments hit Sh666.3 billion, compared to Sh597.6 billion in the same period the previous year.
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“The increase is attributed mainly to the settlement of domestic debt relating to Treasury bills and bonds, which stood at Sh432.83 billion compared to Sh355.17 billion paid in a similar financial year 2023/24 period,” the COB said in her latest report.
Interest payments on domestic debt alone rose sharply to Sh325.7 billion, marking a 2.6-fold increase, significantly contributing to the overall rise in debt servicing costs.
“There was an overall growth in Consolidated Fund Services (CFS) payments over the period, and this is attributed mainly to an increase in interest payments on domestic debt (excluding overdraft) from Sh125.08 billion in the first six months of the financial year 2023/24 to Sh325.72 billion in the financial year 2024/25,” reads the report.
Domestic debt
The increase in domestic debt servicing occurred as the total stock of domestic debt grew from Sh5.41 trillion in June 2024 to Sh5.87 trillion by the end of December.
During this period, the government borrowed Sh487.14 billion in new domestic loans while repaying Sh27.6 billion in domestic principal loans.
“As of December 31, 2024, the public debt stock stood at Sh10.93 trillion, comprising Sh5.06 trillion owed to external lenders (46 per cent) and Sh5.87 trillion due to domestic lenders (54 per cent),” the COB disclosed.
The total public debt stock increased by three per cent from Sh10.58 trillion as of June 30, 2024.
While external debt declined marginally by 0.2 per cent due to the strengthening of the Kenyan shilling, domestic debt grew by eight per cent as the government turned to local borrowing to meet its financing needs.
The shilling appreciated slightly against the US dollar, strengthening from 129.527 units in June to 129.2927 units in December, reducing the external debt burden by Sh9.35 billion.
For the current fiscal year ending June 2025, the government has allocated Sh1.91 trillion for debt payments. This includes Sh809.57 billion for principal repayments and Sh1.01 trillion for interest payments.
Interest payments
External debt payments are expected to consume Sh590.6 billion, of which Sh259.9 billion is allocated for interest.
Meanwhile, domestic debt payments are projected at Sh1.32 trillion, with Sh749.97 billion set aside for interest payments.
During the six months to December 2024, the government settled Sh231.29 billion in external debts, comprising Sh100.89 billion in interest payments, Sh553.67 million in commitment fees, and Sh977.5 million in penalties.
The sharp rise in domestic interest payments highlights the financial strain of borrowing from the local market as the government navigates rising debt obligations amid fiscal constraints.
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