Kenya’s multi-billion-shilling Eurobond buyback programme has come under fresh scrutiny after Controller of Budget Margaret Nyakang’o warned that the exercise is easing immediate repayment pressure while leaving the country with an even bigger debt challenge in the years ahead.
In a report covering the first nine months of the 2025-26 financial year, Nyakang’o says the government’s debt management approach has provided temporary relief from looming obligations but has failed to lower the overall debt burden.
Instead, the country is taking on new loans to settle old ones, a move she says could increase future repayment costs.
The report argues that while the buybacks have helped calm investor concerns and reduce short-term refinancing risks, they do little to address the root problem of a growing public debt stock.
“Kenya’s foreign bond buybacks are a tactical measure, not a permanent solution. They provide short-term fiscal space and reassure investors, but they do not reduce the country’s overall debt stock in the long run,” Nyakango says.
The findings come as the National Treasury, headed by Cabinet Secretary John Mbadi, prepares for the possibility of returning to international markets for additional borrowing in the next financial year.
According to the report, the government spent Sh222.7 billion repurchasing Eurobonds between March 2025 and February 2026. The transactions included a Sh78.3 billion buyback in March 2025, Sh86.3 billion in October 2025 and another Sh58.1 billion in February 2026.
Treasury has defended the programme as a way of reducing repayment pressure linked to Kenya’s 2028 Eurobond and extending debt maturity dates. Through the exercise, some obligations were pushed further into the future, with repayment periods stretching to 2032 and 2037.
However, Nyakang’o notes that the transactions were not without cost. The government paid about Sh6.1 billion in premiums and accrued interest while carrying out the buybacks.
The report also raises questions about the financing behind the programme. To facilitate the transactions, Kenya issued fresh Eurobonds valued at Sh195.5 billion through seven-year and 12-year instruments carrying an average yield of 8.7 per cent.
“This essentially implies that Kenya swapped the old debt for the new rather than reducing the overall debt stock,” the report states.
The concerns emerge against a backdrop of rising public debt. By the end of March 2026, Kenya’s total public debt had reached Sh12.82 trillion, up from Sh11.8 trillion recorded in June 2025.
The increase was largely attributed to domestic borrowing, despite efforts by the government to manage its debt obligations through liability management operations.
Data in the report shows that domestic debt stood at Sh7.14 trillion as of March 2026, while external debt amounted to Sh5.68 trillion.
Treasury bonds recorded the largest increase, rising by Sh688.2 billion from Sh5.11 trillion in June 2025 to Sh5.8 trillion by March 2026. Treasury bills also grew by Sh155.5 billion during the same period to reach Sh1.19 trillion.
At the same time, debt repayment continued to consume a substantial portion of government resources. The report shows that Sh1.35 trillion was spent on servicing debt during the first nine months of the financial year.
Of that amount, Sh763.2 billion went towards domestic debt obligations, while Sh588.9 billion was used to settle external debt.
External debt payments comprised Sh419.7 billion in principal repayments and Sh166.6 billion in interest payments.
The report warns that the growing cost of debt servicing is steadily reducing the funds available for development projects and other government programmes.
The concerns add to recent warnings from Members of Parliament who have questioned the increasing use of borrowed funds and the sustainability of the country’s debt position.
Lawmakers recently revealed that part of Kenya’s external borrowing is being directed towards financing recurrent expenditure instead of development activities.
They cautioned that debt repayments are taking up a growing share of government revenue, leaving limited resources for investment and public service delivery.
In its review of the 2026-27 budget estimates, the National Assembly’s Public Debt and Privatisation Committee also expressed concern that commercial loans acquired through liability management operations are not being used solely to retire existing debt, raising fresh questions about the effectiveness of the government’s debt strategy.