Kenya has announced that it will raise almost two-thirds of its net borrowing for 2025 from the domestic market, as the government seeks to manage its rising debt and reduce exposure to exchange rate risks. According to the Annual Borrowing Plan released by the National Treasury, the country’s gross financing needs are projected at KSh 1.55 trillion this year, equivalent to about 8 percent of its Gross Domestic Product (GDP).
The Treasury explained that the financing will cover a fiscal deficit of KSh 901 billion and refinance maturing obligations worth KSh 646 billion. Out of the net borrowing of KSh 901 billion, KSh 613.5 billion, representing 72 percent, will be sourced from local markets, while the balance of KSh 287.4 billion, or 28 percent, will come from external sources.
Kenya’s total public debt as of June 2025 stood at KSh 11.8 trillion, about 67.8 percent of GDP. The Treasury said it is trying to reduce the risks associated with heavy foreign borrowing, especially currency volatility and refinancing pressure, by focusing more on domestic borrowing.
The borrowing will be led mainly by Treasury bonds, with net issuance expected to reach KSh 634.8 billion. Privatization proceeds of KSh 149 billion will also be part of the domestic financing pool, although this will be partly offset by repayments and other adjustments. Treasury bills, according to the plan, will only be used for short-term cash management.
To strengthen the market and improve liquidity, the Treasury said it will issue bonds with longer-term maturities, ranging from 2 years to 25 years. This will include infrastructure bonds and tap sales, which will be targeted at investors looking for stable long-term returns.
On the external side, financing is projected at KSh 287.4 billion. This will include KSh 221.2 billion from commercial borrowing, KSh 211.2 billion from project loans, and KSh 195.3 billion in program loans. However, these inflows will be offset by principal repayments estimated at KSh 340.2 billion.
Key external inflows will include World Bank Development Policy Operations of KSh 170.5 billion, African Development Bank (AfDB) Program-Based Operations of KSh 21.3 billion, and bilateral loans worth KSh 14.3 billion. The government said this mix aligns with its 2025 Medium-Term Debt Management Strategy (MTDS), which set a borrowing split of 65 percent domestic and 35 percent external.
The strategy is aimed at lowering refinancing and exchange rate risks by prioritizing local borrowing and concessional external loans, while also working to reduce the country’s debt-to-GDP ratio from 63.7 percent to 57.8 percent by 2028.
However, debt servicing remains a major concern. Interest payments for the 2025/26 financial year are projected at KSh 1.1 trillion, which will consume more than a quarter of Kenya’s total revenue. To manage these risks, the Treasury is planning several liability management measures. These include buybacks, bond switches, and a proposed $1 billion debt-for-food security swap with the World Food Programme (WFP).
Analysts say Kenya’s heavy reliance on borrowing, both local and foreign, has been one of the biggest threats to its fiscal stability. The government has been under pressure to reduce its debt load, which has grown rapidly in recent years due to high spending on infrastructure projects, pandemic-related measures, and external shocks.
The Treasury, however, maintains that the new plan represents a more balanced approach, with emphasis on sustainability. By focusing on long-term domestic bonds and concessional loans, officials believe Kenya can lower its refinancing costs and reduce pressure on the shilling.
Still, questions remain about whether the country can achieve its target of reducing the debt-to-GDP ratio to 57.8 percent by 2028, given the high financing needs and the large share of revenue already going into interest payments.
For ordinary Kenyans, the key concern is how this heavy debt servicing will impact government spending on social services, infrastructure, and job creation. With interest payments already consuming over one in every four shillings of government revenue, economists warn that without stronger revenue collection and spending controls, the room for development spending could remain tight.
The Treasury insists that with better debt management, improved tax collection, and the use of innovative instruments like the debt-for-food swap, the country can balance its fiscal challenges while still supporting economic growth.
