Kenya’s public debt is raising serious concerns as the government struggles to meet repayment obligations, with debt servicing consuming nearly 70% of domestic revenues as of June 2024. According to data from the Central Bank of Kenya, the drop in external debt by 15.4% over the first half of 2024 does not indicate an improvement in the country’s fiscal health but reflects gains in the value of the Kenyan shilling following extensive state interventions. Experts warn that without decisive measures, Kenya risks falling into a sovereign debt default that could trigger a financial crisis affecting businesses, banks, and ordinary citizens.
The debt burden has been exacerbated by recent policy challenges, including the withdrawal of the 2024 Finance Bill after nationwide protests, which is projected to reduce government revenue by KES 346 billion (approximately US$2.7 billion) during the 2024/25 fiscal year. Despite the tightening fiscal space, the government continues to borrow, recently negotiating additional loans in China. Analysts highlight that Kenya’s high debt-to-revenue ratio, coupled with weak institutional oversight and inefficient public spending, leaves the country vulnerable to austerity measures, rating downgrades, and potential capital flight if creditors lose confidence.
To mitigate these risks, experts propose a range of solutions including reducing wasteful expenditure, enforcing stricter fiscal rules, strengthening institutions and whistleblower protections, boosting revenue collection through digitalisation, and exploring public-private partnerships. Pre-emptive debt restructuring and reprofiling with creditors could also ease repayment pressures and prevent default. Financial analysts emphasize that lessons from countries like Argentina and Greece illustrate the importance of strategic fiscal management to safeguard economic stability and maintain investor confidence.