(Nairobi) – Kenya’s public debt grew by KSh 228.96 billion (approximately USD 1.5 billion) during the first three months of the 2024/2025 fiscal year, pushing the country’s total indebtedness to KSh 10.8 trillion (USD 72.5 billion) by September 2024. This marks an increase from KSh 10.6 trillion (USD 71.5 billion) at the close of June 2024.
Official data from the Central Bank of Kenya (CBK) shows a 2.2% rise in the national debt during the period, a growth that occurred amid a significant shortfall in tax collections by the Kenya Revenue Authority (KRA). In July, KRA missed its target by KSh 35 billion (USD 233 million), followed by a shortfall of KSh 25 billion (USD 167 million) in August, and KSh 10 billion (USD 67 million) in September. The revenue gap was further widened by the withdrawal of the Finance Bill 2024, which created a KSh 334 billion (USD 2.2 billion) hole in the national budget for 2024/2025.
Domestic debt saw a notable rise of KSh 191.4 billion (USD 1.3 billion), reflecting a 3.5% increase to reach KSh 5.6 trillion (USD 37.5 billion). Meanwhile, external borrowings increased by KSh 37.5 billion (USD 250 million), marking a modest 0.7% rise. The rapid increase in domestic debt corresponds with higher returns on government debt securities, which are predominantly held by banks and other institutional investors. By the end of September, banking institutions held 45% of government domestic debt, while pension funds and other investors held 29.12% and 13.43%, respectively. Insurance companies and state-owned parastatals held smaller shares at 7.15% and 5.3%, respectively.
The government’s foreign debt situation is also growing. Data from the Treasury reveals that loans from the World Bank and the International Monetary Fund (IMF) more than doubled in the five-year period ending June 2024. Loans from these multilateral lenders jumped from KSh 654 billion (USD 4.4 billion) in June 2019 to KSh 2.2 trillion (USD 14.7 billion) by June 2024, now accounting for 43.3% of the country’s total foreign debt.
The mounting public debt has forced Kenya to allocate more than half of its annual tax revenue towards debt repayment, leaving limited funds for other government projects. To address this challenge, Kenya has intensified its efforts to combat tax evasion. KRA is expected to adopt more aggressive measures to increase compliance, especially after the withdrawal of the Finance Bill, which had proposed several tax hikes. Additionally, KRA is working to expand the tax base, aiming to bring more small businesses and the informal sector into the tax fold.