President William Ruto had borrowed at least Sh1.4 trillion as of December 31, 2024, defying his directive to slow down on loans, although the figure reflects a marginal improvement in the debt-to-Gross Domestic Product (GDP) ratio.
Data from the Central Bank of Kenya (CBK) shows that as of December 31, 2022, three months after President Ruto took office, the country’s debt stock stood at Sh8.6 trillion, which represented 67.8 percent of the GDP. It included Sh4.288 trillion in domestic borrowing and Sh4.29 trillion in foreign financing.
As of December 31, 2024, the 2025 Medium Term Debt Management Strategy (MTDS), a government document published annually by the National Treasury and submitted to parliament, shows that the country’s public debt stood at Sh10.6 trillion.
This represented 63 percent of GDP against the benchmark debt threshold of 55 percent of debt to GDP, with the National Treasury having until November 1, 2028, to bring the present value of public debt to within the threshold.
The Sh10.6 trillion includes Sh5.2 trillion in domestic loans and Sh5.4 trillion in loans from the foreign markets.
The debt-to-GDP ratio is a key indicator of a country's financial health, as it reflects the ability to repay debts based on the size of the economy, and Kenya has pegged its benchmark debt threshold of 55 percent.
President Ruto, sworn in on September 13, 2022, has been in power for 31 months with 29 months to go before his first five-year term comes to an end in August 2027.
Kenya’s insatiable appetite to borrow has led to debt stock soaring, with questions from reputable international credit rating agencies- Standard and Poor’s (S&P), Fitch Ratings, and Moody’s raising doubts on the country’s ability to manage the debt repayment when they fall due.
The borrowing spree goes against the president’s pledge during campaigns to focus more investments and other revenue generation streams, including broadening the tax base as he set his eyes on reducing the public debt, which he admitted was choking the country’s economic growth.
“We will change this tradition of applying for loans and be all about investments and labour-intensive programmes as opposed to capital-intensive projects,” President Ruto, then Deputy President, spoke on June 3, 2022, at a campaign rally in Nairobi’s Kamulu area.
This was ahead of the August 9, 2022, general election.
The President made the pledge cognizant of the fact that if he won the presidential race, which he went on to win, he would be inheriting an economy that is overburdened by public debt.
That it would be difficult for him to sort out the pledges he made to the people during campaigns in the first 100 days in office.
The President knew the country was reeling in an economic mess, occasioned by the borrowing spree from China and a myriad of corruption scandals by the Jubilee administration of then President Uhuru Kenyatta and himself as the second in command.
The President’s argument, “borrowing money to run the government will not be an option” for his government, was shared by many, including economic and financial experts.
The president went ahead to accuse his then main rival in the August 9, 2022 presidential election- the Azimio candidate, Mr Raila Odinga- of “planning to continue massive borrowing of loans.”
“Ours is about exploiting available local options to generate income to run the country,” he said.
The president went ahead to warn that overborrowing is not good, as over 60 percent of the country’s revenue goes into debt repayment.
“As of now, for every Sh10 that we collect in revenue, Sh6 goes into debt repayment,” the president spoke during a Church service at Laare, Meru County, on September 11, 2023, just two days before commemorating his first anniversary as president.
The country’s debt stock is bound to escalate with the government projecting a budget of Sh4.2 trillion in the 2025/26 financial year, currently under consideration in the National Assembly against depressed revenue streams.
The budget has a fiscal deficit of Sh876.1 billion to be financed by a net external financing of Sh284.2 billion, about 1.5 percent of the GDP, and a net domestic borrowing of Sh591.9 billion, which is 3.1 percent of the GDP.
The loans will likely be sourced from commercial markets, with budget documents before parliament showing zero funding from the International Monetary Fund (IMF) until June 2029.
While Kenya has been seeking IMF support to address fiscal deficits and economic challenges, the budget documents indicate a planned transition away from direct IMF financing, potentially with increased reliance on other lenders like the World Bank.
Auditor-General Nancy Gathungu has already warned that the Sh4.2 trillion budget for the 2025/26 financial year will expose the government to a borrowing spree as it is not aligning with the anticipated revenue streams.
Ms Gathungu issued the warning as National Treasury Principal Secretary Dr Chris Kiptoo revealed that by March 2025, the government had overshot its domestic borrowing for the 2024/25 period by Sh220 billion against the limit approved by the National Assembly.
The country’s public debt situation has also been captured by Trading Economics, a website that provides extensive economic data, indicators, and news for various countries, including Kenya, and offers historical data, real-time updates, and insights into economic trends used for research, investment, and financial analysis.
Fast forward to October 2023, and the president was travelling to China with a begging bowl to seek more commercial loans.
The weakening of the Kenyan shilling against the major international currencies is not doing justice to the repayment of the dollar, Euro, and yuan-denominated external debts.
National Treasury Cabinet Secretary John Mbadi did not respond to our inquiries sent to his known phone number.
“Debt is unavoidable. We must borrow prudently going forward,” Mr Atandi said as he accused the immediate former President Uhuru’s administration “for poor management of the economy, especially piling debt without channeling the same to development.”
Interest payment on debt has since skyrocketed from Sh171 billion in 2014, a year after President Uhuru took over from the late Mwai Kibaki, to Sh840 billion in 2022.
“While over the same period, development expenditure remained stagnant at Sh530 billion,” says Mr Atandi.
In the current financial year- 2024/25- Kenya is spending Sh1.2 trillion on interest repayments for its public debt.
This represents a significant portion of the total debt service obligation, which is Sh1.85 trillion, including debt redemption of Sh843.4 billion, according to the Institute of Public Finance (IPF).
In 2023, Kenya’s sovereign rating was placed at B by both Standard and Poor’s (S&P) and Fitch Ratings.
Moody’s rated Kenya at B3 with a negative outlook. Despite this, the National Treasury notes that Kenya’s public debt is within sustainable levels.
“The fiscal consolidation path is aimed at lowering fiscal deficit to curtail growth in the public debt,” the January 2024 MTDS documents assure, with Mr Atandi also bullish.
“We are not threatened by debt default,” said Mr Atandi, adding that although interest on debt is high, “it is manageable.”
In a document before parliament, Ms Gathungu reveals that the previous record where the Kenya Revenue Authority (KRA) has missed the revenue targets worsens the credibility of the government’s proposed expenditure plans.
The 2025/26 estimates project ordinary revenue at Sh2.8 trillion, about 14.7 percent of the Gross Domestic Product (GDP up from Sh2.6 trillion, which is 14.8 percent of GDP for the 2024/25 period.
“This falls short of the World Bank’s recommended minimum tax-to-GDP ratio of 15 percent. This trend raises some concern on the accuracy of revenue projections in the budget,” says Ms Gathungu.
The projected Sh4.2 trillion budget for the 2025/26 financial year is an increase from the Sh3.978 trillion budget under execution for the current financial year, 2024/25.
“I have raised the challenge of tax revenue collection in my audit reports. If the trend continues, it will be difficult to meet the expenditure projections for the 2025/26 financial year without resulting in borrowings,” adds Ms Gathungu.
To address the issue and assure the country of a credible budget, now and in the future, Ms Gathungu recommends that the National Treasury adopt “a more cautious approach to revenue forecasting” while taking into account historical trends and potential risks to economic growth.
This, the Auditor-General says, will help avoid overestimating revenue and ensure that expenditure commitments are aligned with realistic resource projections.
“The government should also strengthen tax administration efforts to improve compliance and expand the tax base,” says Ms Gathungu.
“This includes modernising tax collection systems, enhancing taxpayer services, and addressing tax evasion and avoidance.”
The admission by Dr Kiptoo before the Finance and National Planning Committee of the National Assembly exposes the government to expensive commercial loans, as it poses a risk of crowding out cheap credit to the private sector.
This is despite the PS’ assurance that the government intends to live within the Sh761 billion budget deficit for the current period approved by the National Assembly in July 2024 and carried in the Supplementary Appropriation Act 2024.
“As of yesterday, we had borrowed Sh624 billion from the local market. This is due to delayed foreign financing,” Dr Kiptoo told the committee chaired by Molo MP Kimani Kuria on March 6, 2025.
“We expect to live within our means, the approved deficit,” added the PS.
The loans that the government procures locally are commercial in nature and are a risk to minimiSing the costs of the public debt, as they attract a higher interest rate and their repayment period is shorter compared to concessional loans.
The main local lenders to the government are commercial banks that own 45 percent of the government securities on average, followed by pension funds at 32 percent.
In the current fiscal period, the government had planned to borrow Sh263.2 billion from the local market.
However, the domestic borrowing was increased by Sh141.4 billion following the rejection of the Finance Bill 2024, which had projected that the Kenya Revenue Authority (KRA) would collect Sh344.3 billion to finance the Sh3.992 trillion budget that was approved by the National Assembly for the 2024/25 fiscal period.
The revelations by the PS go against the National Treasury’s own commitments to minimise the costs and risks of public debt by mobilising resources mainly from the multilateral and bilateral development partners.
“Commercial borrowing sources will be utilized as a last resort to fund the fiscal deficit and repay maturing external debts. Net domestic financing requirements will be met through the issuance of Treasury bonds in the domestic market,” the 2024 BPS approved by parliament noted.
“More emphasis will be on maximizing concessional loans while non-concessional borrowing will be limited to economic enabler projects that cannot secure concessional financing and are in line with the Bottom-Up Transformation Agenda of the government,” the BPS says.
The auditor’s document shows that for the last five financial years, save for one, KRA has not been able to meet its ordinary revenue projections.
For instance, in the 2023/24 financial year, the government projected to collect Sh2.5 trillion, but the taxman realised Sh2.3 trillion, leaving a shortfall of Sh170.4 billion, about a 6.9 percent reduction.
In the 2022/23 period, the projected revenue was Sh2.2 trillion, but Sh2.1 trillion was realized, about Sh99.35 billion shortfall.
It is only in the 2021/22 financial year that the actual revenue collections surpassed the projected revenue by Sh101.5 billion.
During the period, the government had projected KRA to collect Sh1.89 trillion but ended up realizing Sh1.94 trillion, about a 5.5 percent increase of the projected base.
In the 2020/21 period, KRA missed the target by Sh581.6 million against the projected Sh1.6 trillion, about 0.04 percent, while in the 2019/20 financial year, Sh50.9 billion was the missed target against the projected Sh1.67 trillion.
