Kenya Faces New Debt Challenge as Treasury Discloses KSh716 Billion Repayment Bill

Kenya’s public debt has climbed to KSh13.01 trillion, marking an increase of about KSh1.2 trillion in one year as the government grapples with mounting borrowing costs and growing pressure to finance its budget.

Figures presented by National Treasury Principal Secretary Chris Kiptoo to the National Assembly’s Departmental Committee on Finance and National Planning on Tuesday, October 27, 2026, showed that the country’s total public and publicly guaranteed debt rose from KSh11.81 trillion in June 2025 to KSh13.01 trillion by June 2026.

Kiptoo told lawmakers that domestic borrowing now accounts for 56 per cent of the total debt, while external loans make up 43.7 per cent. This marks a reversal of the previous position, when Kenya owed more to foreign lenders than domestic creditors.

In June 2025, domestic debt stood at approximately KSh6.3 trillion, compared with KSh5.48 trillion in external debt.

The Treasury attributed the rising borrowing requirements partly to the cost of servicing existing loans. Kiptoo disclosed that debt repayments during the period included KSh504.3 billion in principal payments and KSh211.8 billion in interest, bringing the reported total to KSh716.1 billion.

The government had targeted borrowing more than KSh1.5 trillion during the 2025/26 financial year to finance a budget deficit of KSh901 billion and refinance KSh646.3 billion in maturing debt.

The growing reliance on domestic borrowing has raised concerns among MPs, who warned that increased government demand for money in local financial markets could make it harder for private businesses to obtain loans. It could also push borrowing costs higher for companies seeking credit to expand their operations.

The Treasury further reported that national government revenue, including Appropriations-in-Aid, reached KSh3.1988 trillion against a target of KSh3.259 trillion, leaving a shortfall of approximately KSh60.2 billion.

Despite the revenue gap and mounting debt obligations, the Treasury recorded a budget absorption rate of 93.3 per cent in the 2025/26 financial year. Kiptoo also reported that Kenya’s real GDP growth improved to 5.3 per cent in the first quarter of 2026, up from 4.9 per cent during the same period in 2025.

However, rising public debt, inflationary pressures, geopolitical tensions and low absorption of donor-funded development projects remained among the challenges affecting budget implementation.

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