Kenya’s home debt jumps to Ksh6.12 Trillion

Kenya’s home debt has risen considerably, rising by 26.7 per cent from Sh4.83 trillion in June 2023 to Sh6.12 trillion in March 2025. This enhance reveals the federal government’s rising urge for food for short-term borrowing, which may hurt long-term monetary stability and scale back the provision of credit score for companies.

A report from the Central Bank of Kenya (CBK) for the interval ending March 14, 2025, reveals that Treasury Bonds make up over 84 per cent of presidency securities.

While these bonds supply stability with long-term maturities, additionally they include strict reimbursement schedules. At the identical time, the share of Treasury Bills has grown from 13.28 per cent to fifteen.12 per cent, indicating a desire for short-term financing to satisfy rapid money wants.

However, this technique raises issues about refinancing dangers, as the federal government ceaselessly wants to resume short-term money owed in an surroundings of rising rates of interest. Heavy home borrowing is diverting assets from vital sectors like infrastructure and healthcare.

Banks, which maintain 44 to 46 per cent of presidency securities, are lending extra to the federal government than companies, making it more durable for small enterprises to entry credit score. Insurance corporations and pension funds additionally spend money on authorities securities, however their involvement is lowering as they alter their funding methods to market adjustments.

Meanwhile, the rising participation of retail and overseas buyers provides volatility, as these non-traditional patrons are extra possible to withdraw throughout market shocks, additional destabilizing the monetary panorama. The CBK’s overdraft facility utilization peaked at Sh109.82 billion in March 2025, whereas International Monetary Fund (IMF) on-lent funds declined, signalling diminished reliance on multilateral buffers.

With home debt now at 45.3 per cent of complete public debt (Sh10.6 trillion as of June 2024), borrowing prices are escalating, with yields on 91-day, 182-day, and 364-day Treasury Bills reflecting tighter liquidity and threat premiums.

Debt service prices

The authorities’s fiscal deficit is projected to slender to three.3 per cent of gross home product (GDP) in Financial Year (FY) 2024/25, down from 5.7 per cent in FY2023/24, with additional reductions to 4.3 per cent in FY2025/26 and three.5 per cent in FY2026/27.

Debt service prices, although nonetheless elevated, are being managed by diminished exterior industrial borrowing and legal responsibility restructuring. Total public debt stands at 68 per cent of GDP in FY2023/24, declining to 64.8 per cent in FY2024/25, supported by improved income assortment and foreign money stability.

Kenya’s fiscal troubles are “largely homemade,” rooted in previous infrastructure-driven borrowing sprees and COVID-19 shocks.

While IMF programmes purpose to stabilise debt by fiscal consolidation, current protests over tax hikes and austerity measures spotlight political constraints.

The withdrawal of a tax invoice in July 2024, regardless of IMF backing, underscores the fragility of reform efforts. External debt stays a problem, with China’s $6.3 billion bilateral loans (17 per cent of complete exterior debt) and dear syndicated loans straining reimbursement capability.

However, multilateral collectors just like the World Bank stay pivotal, providing concessional phrases that mitigate rapid misery. Kenya has additionally addressed its $2 billion Eurobond reimbursement in June 2024 by a $1.5 billion worldwide bond issued earlier this 12 months, easing near-term exterior pressures.

Kenya’s debt scenario mirrors a broader African development of leveraging home markets to keep away from exterior shocks however at the associated fee of fiscal flexibility.  While Treasury Bonds supply stability, the shift towards short-term debt and reliance on overdrafts dangers liquidity crises if investor sentiment sours.

The IMF’s debt sustainability evaluation flags Kenya’s vulnerability to export and exchange-rate shocks, compounded by weak governance in tasks just like the Standard Gauge Railway.