Kenya’s public debt has sparked widespread concern, with critics quick to decry borrowing without offering context. While it is true that the debt-to-GDP ratio – projected to fall from 65.5 per cent in 2024 to 63.6 per cent this year – still exceeds the IMF’s recommended 50 per cent threshold for developing countries, criticism without perspective is misleading.
Warnings about Kenya’s debt burden are not new. Economists have sounded the alarm for years. The ideal time to halt unsustainable borrowing was in 2013; the next best time is now.
However, Kenyans have consistently rejected tough fiscal reforms, especially tax measures aimed at increasing government revenue. Meanwhile, the government has not demonstrated a strong enough commitment to reducing expenditure or improving fiscal discipline.
To evaluate current borrowing, we must look at Kenya’s debt trajectory over the past two decades. In 2002, total public debt stood at Sh629.6 billion domestic and Sh369.7 billion external.
During President Mwai Kibaki’s term (2002-2012), debt grew moderately to Sh1.49 trillion by January 2012. Domestic debt rose to Sh971.3 billion and external debt to Sh822 billion. By October 2012, the debt-to-GDP ratio stood at 45 per cent, well below today’s figures. Kibaki’s borrowing was largely concessional, with low interest rates and long repayment periods.
President Uhuru Kenyatta took office in 2013 amid strong economic growth and relatively low debt levels. Over the next decade, debt ballooned to Sh8.69 trillion by December 2022 – Sh4.15 trillion domestic and Sh4.54 trillion external. This period saw a shift toward commercial loans like Eurobonds and Chinese credit, which carried higher interest rates. Mega infrastructure projects such as the Standard Gauge Railway and LAPSSET drove much of this borrowing. Kenya’s debt-to-GDP reached 67.8 per cent by the time Uhuru left office.
President William Ruto inherited a challenging economic situation in 2022; an over-reliance on expensive commercial debt and a depreciating shilling that inflated repayment costs. A single-unit drop in the shilling is estimated to raise debt by Sh40 billion, significantly increasing the burden on external obligations.
To mitigate the currency risks, Ruto’s administration has shifted toward domestic borrowing. By December 2024, total public debt stood at Sh10.7 trillion. Criticism of this borrowing often ignores a crucial factor; a substantial portion is being used to refinance debt accrued under the previous administration. In the 2025/2026 fiscal year, debt interest repayments alone totaled Sh1.09 trillion. Additionally, the government had to borrow to cover budget deficits, especially after the suspension of the 2024 Finance Bill, which had proposed tax measures to reduce reliance on debt.
Despite these challenges, Kenya has avoided defaulting on its sovereign obligations – a feat worth acknowledging. The Treasury has engaged complex financial management to stay afloat. Credit rating agencies have taken note. In August, Standard and Poor’s upgraded Kenya’s rating for B- to B; Moody’s revised the outlook from negative to positive; and Fitch affirmed its B-rating with a stable outlook.
Kenya is far from being a failed state. While fiscal hurdles remain, portraying the country as being on the brink is inaccurate and unhelpful. Real progress is being made in stabilising public finance – and that deserves recognition. Criticising public borrowing without explaining its purpose is the sophist’s approach to an important national conversation. It should stop.
Mr Khafafa is a public policy analyst
