Kenya's public debt has gone up by Sh1.2 trillion in just one year, and the government is now borrowing more from local banks and investors than many Kenyans would like to see. Treasury Principal Secretary Chris Kiptoo gave the latest figures to the National Assembly's Departmental Committee on Finance and National Planning on Tuesday, October 27.
According to the Treasury, the country's total public and publicly guaranteed debt stood at about Sh13.01 trillion by June 2026. This is up from Sh11.81 trillion a year earlier. Out of this amount, domestic debt, which is money borrowed from within Kenya, makes up 56 per cent. External debt, borrowed from foreign lenders, is 43.7 per cent. Kiptoo noted that this is a reversal of the situation a few years back, when foreign borrowing was the bigger share.
The bill for repaying loans from abroad is also biting hard. In the year under review, the government paid out Sh716.1 billion just to service external debt. Of that, Sh504.3 billion went to paying back the principal, and Sh211.8 billion was interest. That is money that could otherwise have gone to roads, schools, hospitals, or even to the counties.
The government also struggled to collect the money it had planned for. Total national government revenue, including Appropriations-in-Aid, came in at about Sh3.199 trillion against a target of Sh3.259 trillion. That leaves a shortfall of roughly Sh60.2 billion. When income falls short, the gap usually gets filled through more borrowing, and that is exactly what has been happening.
For the 2025/26 financial year, the Ministry had planned to borrow more than Sh1.5 trillion. Of this, Sh901 billion was to cover the fiscal deficit, which is the gap between what the government spends and what it earns. The remaining Sh646.3 billion was for refinancing loans that had matured and needed to be paid off. Kiptoo blamed the heavier borrowing on the high cost of servicing old debts.
On the spending side, the Treasury says the overall budget absorption rate was 93.3 per cent for the 2025/26 year. Recurrent spending, which covers salaries and daily running costs, was absorbed at 95.2 per cent. Development spending, which is meant for projects like roads and dams, was at 88.8 per cent. In one department, Kiptoo said Sh118.64 billion was spent out of an approved Sh127.14 billion by the end of June.
There is some good news too. The Treasury 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 in the same period of 2025. Still, Kiptoo was clear that the road ahead has bumps. He listed rising public debt, inflation pressures, tensions in the global market, and slow use of donor-funded projects as some of the challenges making it hard to implement the budget.
Members of the committee were not impressed by the heavy reliance on local borrowing. Several MPs warned that when the government borrows a lot from local banks and financial markets, it can crowd out private players. In plain terms, this means businesses, especially small traders and SMEs, may end up paying higher interest rates or find it harder to get a loan. The lawmakers argued that the government should find ways to reduce its domestic borrowing before it starts choking the private sector.
0 Comments