Kenya’s total public and publicly guaranteed debt reached KSh 12.4 trillion by the end of January 2026, marking an annual increase of KSh 1.41 trillion and pushing the debt-to-GDP ratio to 67.6%, according to the latest monthly report from the National Treasury.
This rise continues a steady upward march that has seen the country’s debt stock nearly double since 2019, with little indication of a slowdown.
Domestic borrowing remains the chief contributor, expanding by KSh 963 billion, or 16.2% year-on-year, to KSh 6.89 trillion. External debt also grew, rising by KSh 450 billion, or 8.9%, to KSh 5.51 trillion. However, the January uptick of KSh 45 billion was largely attributed to exchange rate movements rather than fresh borrowing.
Projections from the IMF’s April 2026 Regional Economic Outlook suggest the debt ratio could climb further to 71.6% of GDP in 2026 and 72.4% in 2027, nearing the 2023 peak of 73.4%. This trajectory is underpinned by ongoing fiscal deficits estimated at 6.4% of GDP in both 2025 and 2026.
Within the first seven months of the 2025/26 financial year, domestic borrowing accounted for KSh 504.65 billion, or 80.6%, of the KSh 626 billion added since July 2025.
Treasury bonds dominate the domestic debt profile, making up 81.8% of the total, with a bond-to-bill ratio of 82:16. The average maturity period has edged up slightly to 7.85 years, reflecting the government’s continued tilt towards longer-term instruments.
On the external front, the government secured three new loans between November and December 2025. The largest, a CNY 1.33 billion facility from the Export-Import Bank of China for the Nairobi Intelligent Transport Systems project, carries a 27-year tenure at a 2% interest rate but has yet to be disbursed.
Germany extended two additional concessional loans: a EUR 38 million SAFER facility aimed at supporting MSME liquidity over 67 years, and a EUR 28 million loan for TVET digitisation spanning 66 years at rates between 0.75% and 1.20%. Of the three, only the TVET loan has been fully disbursed.
Institutional investors continue to shoulder much of the domestic financing burden. By January 2026, banks held KSh 2.36 trillion, roughly 34% of domestic debt, while insurance firms and pension funds accounted for KSh 1.90 trillion, underscoring the close ties between government borrowing and the financial sector.
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Net domestic financing stood at KSh 458.25 billion against a full-year target of KSh 634.75 billion, meaning over 72% of the annual borrowing plan had already been absorbed within seven months. Interest payments on domestic debt reached KSh 479.67 billion, reflecting the growing cost of servicing a bond-heavy portfolio.
Currency depreciation also played a role in inflating external debt figures. In January, the shilling weakened against major currencies including the yen, euro, and pound, increasing the local currency value of foreign-denominated obligations. Multilateral debt, now accounting for 56.3% of external debt, rose significantly on this basis alone.
Meanwhile, China’s bilateral lending exposure to Kenya continued to decline, dropping to KSh 606.05 billion, extending a broader trend of reduced Chinese financing.
External debt servicing for January totalled KSh 55.7 billion, including KSh 34.15 billion in principal and KSh 21.55 billion in interest. Cumulative external debt service for the financial year reached KSh 432.95 billion, about 60.4% of the annual target.
In a notable development, Moody’s upgraded Kenya’s sovereign credit rating to B3 with a stable outlook on January 27, citing improved foreign exchange reserves, reduced short-term default risks, and progress in managing Eurobond liabilities. Reserve cover has strengthened to 4.9 months of imports, though fiscal pressures remain unresolved.
Kenya’s statutory debt ceiling of 55% of GDP, as outlined in the Public Finance Management Amendment Act 2023, remains a distant target. IMF projections place the ratio at 72.4% by 2027, leaving a substantial gap to bridge ahead of the 2028 deadline.
