Kenya added more than half a trillion shillings to its public debt in just three months, pushing the country's total debt burden to Sh12.83 trillion and highlighting the government's continued dependence on borrowing to finance its spending and manage existing obligations.
New official data shows public debt rose by Sh533 billion between December and March, increasing from Sh12.29 trillion to Sh12.83 trillion during the period.
Domestic borrowing accounted for the largest share of the increase, with the stock of local debt rising from Sh6.81 trillion in December to Sh7.15 trillion by the end of March. External debt also grew, moving from Sh5.46 trillion to Sh5.68 trillion.
The latest figures show the government's reliance on the domestic market remains strong, with banks, pension schemes and other institutional investors continuing to provide a significant share of funding for public expenditure.
The trend has drawn concern from economists who argue that increased government borrowing from the local market could leave fewer funds available for businesses seeking credit, as financial institutions continue to favour government securities.
The growth in debt comes at a time when the National Treasury is expanding efforts to manage repayment pressures through liability management operations aimed at reducing risks linked to maturing debt.
Over the past few years, the Treasury has increasingly used debt buybacks, bond switches and swaps to replace debt nearing maturity with longer-term obligations that offer a smoother repayment path.
As part of efforts to improve openness in debt management, the Treasury announced in February that it would begin disclosing in advance the amount of debt targeted for restructuring through buybacks, switches and swaps.
“The National Treasury shall budget for liability management operations within the national budget and fiscal framework,” the Treasury said while outlining the new disclosure framework.
“A specific Liability Management Operations (LMOs) vote line in the annual budget estimates under public debt management shall be provisioned with adequate estimates every year.”
Kenya has already carried out several liability management operations, including buybacks involving Eurobonds due in 2024, 2027 and 2028. The government has also undertaken a currency swap connected to debt incurred during the construction of the Standard Gauge Railway.
The operations have helped ease concerns over large repayment deadlines that had previously unsettled investors and raised questions about the country's ability to meet its debt obligations.
Pressure on Kenya's debt management strategy intensified ahead of the June 2024 Eurobond maturity, when investors closely watched the government's ability to secure enough foreign currency to settle the debt.
The Treasury later returned to the international market and secured fresh Eurobond financing, using part of the funds to retire sections of existing debt before maturity and spread repayments over a longer period.
Controller of Budget Margaret Nyakang’o has previously warned that growing debt repayment costs could consume an increasing portion of government revenues, leaving less money available for development projects.
She has also cautioned against relying heavily on new loans to settle old debts, warning that such an approach could expose the country to greater financial risks in the years ahead.