Kenya’s total public debt has exceeded KSh 12 trillion, standing at KSh 12.06 trillion as of September 2025, according to fresh data from the National Treasury. This represents a year-on-year jump of KSh 1.26 trillion from KSh 10.8 trillion recorded in September 2024.
The debt now accounts for 67.3% of the nation’s Gross Domestic Product (GDP), with KSh 6.66 trillion, equivalent to 37.2% of GDP, owed domestically, and KSh 5.39 trillion, or 30.1%, owed to external lenders. The debt-to-GDP ratio edged up slightly from 66.5% to 67.3%, suggesting that borrowing and nominal GDP growth remain closely aligned.
Between June and September 2025 alone, Kenya’s debt load increased by roughly KSh 250 billion. This was largely due to a KSh 340 billion rise in domestic borrowing, partially offset by an KSh 80 billion reduction in external debt. The shift signals a deliberate move by the Ruto administration to reduce reliance on costly foreign loans that strain the shilling through foreign exchange exposure.
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Kenya’s turn toward the domestic credit market began in earnest in the 2022/23 financial year when the country grappled with a maturing $2 billion Eurobond amid soaring global interest rates and a weakening currency. As international credit conditions tightened, local borrowing became the government’s default funding option.
While Treasury Cabinet Secretary John Mbadi has praised this pivot as a sustainable approach, analysts remain sceptical. The Institute of Economic Affairs (IEA) has cautioned that domestic debt is proving far more expensive. Their report notes that Kenya paid interest rates as high as 19% on local bonds in the past financial year, nearly triple the cost of typical commercial external loans.
“The idea that domestic debt is cheaper is misleading,” the IEA warned. “Even with recent drops, Treasury Bill and bond yields averaging 8-13% still outstrip the 4-8% rates of multilateral and external loans.”
Economists from the institute are now advocating for expanded use of public-private partnerships (PPPs) to finance large-scale infrastructure projects, arguing that such models could ease pressure on public debt while sustaining economic growth.
