By Felix Kiprono and Kelvin Ndiritu
President William Ruto has just concluded his state visit to China returning with a new set of deals aimed at boosting Kenya’s infrastructure, trade, and manufacturing space. The agreements, worth about KSh137 billion (roughly USD 1.06 billion), cover everything from extending the Standard Gauge Railway (SGR) further to Malaba, to major road upgrades like the Nairobi-Nakuru-Mau Summit Highway, plus new agricultural and manufacturing initiatives in counties like Kilifi, Mombasa, and Machakos.
Government officials are painting this as a major win—proof of stronger ties with China and a boost to Kenya’s development agenda. But not everyone’s convinced. With the country already feeling the pinch from existing debt, these new commitments have stirred fresh debate about whether we’re biting off more than we can chew.
Reality Check on Kenya’s Debt
Kenya’s debt has risen at an alarming rate over the last ten years, reaching Ksh 10.4 trillion in 2024—a massive leap from Ksh 1.9 trillion in 2013. Today, this debt is equivalent to 65% of the country’s GDP, burdening the economy heavily as a result. The consequences are being felt by Kenyans daily: higher taxes, fewer development projects, and shrinking resources for essential services. For every 100 shillings the government collects, 50 go toward debt repayment, leaving little room to fund critical development priorities.
How did we get here? Who holds Kenya’s debt, and what power do they wield? Most importantly, what risks does this growing debt pose for the country’s future? Let’s break it down.
President Ruto continues a 15 – year binge on debt.
First, even though Kenya has had debt as far back as the 1990s, the debt binge seems to have started in earnest with the onset of President Uhuru’s administration and continues to this day. In the 2012/2013 financial year, when Uhuru became president, Kenya’s total debt was Ksh 1.9 trillion, which rose by 471% to Ksh 10.6 trillion in July 2024.
Following President Kenyatta’s steps, President Ruto came into office in September 2022, and since then, Kenya’s debt has increased from Ksh 8.6 trillion in 2022 to Ksh 10.6 trillion in 2024. Domestic debt grew faster from Ksh 4.37 trillion in September 2022 to Ksh 5.4 trillion in July 2024, while external debt rose from Ksh 4.3 trillion to Ksh 5.2 trillion in the same period.
Even though Kenya’s external debt declined slightly after the payment of the Ksh 71.5 billion Eurobond balance due in June, borrowing continued to rise in April, with the government adding more debt of Ksh 35.4 billion within a month.
The public debt burden and its consequences
The World Bank recently ranked Kenya as the fourth most debt-burdened country in the world, raising questions about how such a crisis occurs. Looking at the size and composition of Kenya’s debt, we can see why it strains the economy and burdens the taxpayer. For instance, 67.9% of Kenya’s debt is in dollars, and 21.4% is in euros. Every time the dollar or the Euro appreciates against the shilling, our total debt and interest payments also increase, causing significant strain on the government and taxpayers.
In addition, the size and composition of debt make repaying it much more difficult, complicating the debt management strategy. In FY 2023/2024, Kenya’s total revenue was Ksh 2.7 trillion. The government spent 51% of that amount in repaying Ksh 1.38 trillion in debt. This means for every 100 shillings that the government collected, more than half went toward repaying debt.
As debt repayments grow, the government has less money for critical functions like development projects, salaries, and infrastructure maintenance. To fill the gap, it often turns to even more borrowing — fueling a vicious cycle of debt distress. For countries already under strain, new loans typically come at higher costs as investor confidence falls, pushing up interest rates.
Who We Owe, and the Risks This Debt Brings
Kenya borrows both domestically and externally. As of July 2024, domestic borrowing was 51.2% of Kenya’s total debt and amounted to Ksh 5.4 trillion.
A closer look at Kenya’s domestic debt reveals a heavy dependence on Treasury Bonds and Treasury bills, which accounted for over 97% (Ksh 5.7 Trillion in December 2024). The rest of the domestic debt is loans, the largest of which is from commercial banks, holding Ksh 101 Billion as at December 2024
Domestic debt is particularly expensive: although it accounts for just 51% of the total debt, it consumes 74% of all interest payments, largely due to heavy borrowing from local commercial banks at high interest rates
For instance, the average interest rate for the 91-day T-bill was 15.75% in April 2024. By comparison, external concessional loans are cheaper than commercial loans.
Rising domestic debt can be a worrying sign, especially if the loans come at exorbitant rates or end up crowding out private sector borrowing.
External debt composition includes bilateral lending from countries such as China, Japan, and France, commercial loans such as Eurobonds, and multilateral loans from the World Bank, IMF, and the African Development Bank (AfDB). Kenya’s biggest bilateral lender as of April 2024 was China, whom it owed Ksh 755.9 billion. By comparison, the World Bank was Kenya’s largest multilateral lender at Ksh 1.5 trillion. While external debt may be an important source of funding for the government, these funds come with significant risks and are subject to misappropriation. For instance, audit reports have yet to ascertain how the 2014 Eurobond was used.
External loans come with strings attached
Additionally, external loans come with strings attached or terms and conditions that a country has to abide by. Conditions which may impose an even higher burden on the country and its citizens. For instance, as of April 2024, Kenya owed China Ksh 755.9 billion. These loans go toward infrastructure projects that usually require Chinese equipment, labour, and other resources as part of the lending terms.
Multilateral lenders like the IMF, World Bank, and the AfDB have even stricter loan terms. For instance, Kenya entered the IMF program policy in April 2021 in exchange for a $3.6 billion loan facility. To access these funds, Kenya needed to promote debt sustainability by managing public expenditure, raising revenue, and addressing revenue leakages in Kenyan State-Owned Enterprises as per IMF terms. This required changing laws and introducing new ones. For instance, Tax Laws (Amendment) Bill 2024, Tax Procedures (Amendment) Bill 2024, and Public Finance (Amendment) Bills, have been introduced this year to address revenue shortfalls by KRA.
Similarly, the World Bank’s loan facility also comes with strings attached. For instance, to access a $1.2 billion facility, the World Bank required that Kenya implement an e-procurement system to handle all spending by government ministries and departments. It also demanded that the public wage bill as a share of revenue be reduced to 35%, inter-county trade increased, and refugees and displaced people integrated into the county system.
A path to sustainable debt: What Kenya can do?
Kenya’s debt binge continues unabated as President Ruto’s administration pursues even more borrowing. However, the government can take a different approach to avoid further risks. For instance, the Institute of Economic Affairs (IEA) argues that the debt problem can be managed by limiting government expenditures in the short run.
The Institute of Public Finance, on the other hand, observes that Kenya could reduce borrowing if it addressed theft and stashing of public funds in offshore accounts. Finally, Civil Societies recommend accountability and transparency in public debt management, requiring the government to disclose past and future debt contracts and details on repayment dates for all debt.
Cover Image: President William Ruto visits the Contemporary Amperex Technology Company Limited (CATL) headquarters in Ningde City, Fujian Province, on April 25, 2025. Via State House Kenya
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