Nairobi, Kenya – July 13, 2025
By Edward Lyomu, Mulembe Times
Kenya is scheduled to repay a substantial KSh 68.7 billion in foreign debt this month, a move that once again casts a spotlight on the country’s growing debt obligations and the strain they continue to place on national development and social spending.
According to financial analysts and the National Treasury, the payment will be drawn from the country’s official foreign exchange reserves, which currently stand at an estimated KSh 1.43 trillion. The repayment includes interest and principal on multiple bilateral and multilateral loans.
The repayment is part of the regular external debt service cycle and comes just weeks after the Treasury reported making a KSh 71 billion repayment in June, demonstrating the continued pressure that debt obligations exert on the government’s fiscal position.
Heavy Debt Servicing Outpaces Public Services
A recent report by the United Nations Conference on Trade and Development (UNCTAD) painted a concerning picture, showing that Kenya now spends over 6.5% of its total export revenues on debt repayments—a figure that surpasses the country’s spending on essential services like healthcare and education.
In the 2024/2025 fiscal year, Kenya has allocated an unprecedented KSh 1.85 trillion to debt servicing. Of this amount, KSh 843.4 billion will go toward repaying principal amounts, while KSh 1.01 trillion will cover interest payments. These figures represent over 50% of total national revenue projections, leaving little room for critical development and social programs.
“Debt is now the single largest item in our national budget. What’s worrying is not just the amount, but the rate at which we’re using public money to pay past borrowing rather than investing in future growth,” said Dr. Geoffrey Muya, an economist at Strathmore University.
Treasury Reforms and the Need for Transparency
In response to growing concerns, the Treasury has adopted the Commonwealth Meridian Debt Management System, a digital platform designed to offer real-time tracking and auditing of national debt. This reform is expected to enhance transparency, reduce irregularities, and give the Auditor-General direct access to Kenya’s loan obligations and repayment status.
Treasury Cabinet Secretary Prof. Njuguna Ndung’u emphasized that the system would help the government maintain fiscal discipline, avoid unsustainable borrowing, and ensure timely repayments.
“With the new system in place, we have a better grip on how much we owe, to whom, and when repayments are due. This will significantly reduce the risk of default and promote better planning,” he said during the launch in Nairobi.
China and Multilateral Lenders Dominate Kenya’s Loan Portfolio
China remains the largest bilateral creditor, accounting for an estimated 72% of Kenya’s outstanding foreign debt, mostly tied to large-scale infrastructure projects like the Standard Gauge Railway (SGR), roads, and power plants. Kenya also owes significant amounts to the World Bank, the International Monetary Fund (IMF), and the African Development Bank (AfDB).
Although some of the borrowed funds have supported development, the cost of repayment has continued to outpace the returns from these investments.
Pressure on Social Spending and Economic Growth
With debt repayments taking a lion’s share of national resources, analysts warn that sectors such as health, education, and agriculture could face underfunding.
“The opportunity cost is staggering,” said Rachel Otieno, a budget policy expert. “Every shilling paid in debt service is one less for hiring teachers, building hospitals, or funding youth programs.”
The government has also faced criticism for lack of a clear, long-term debt reduction strategy. While current repayments are being made on time, experts warn that continued borrowing without corresponding revenue growth could plunge the country into a debt crisis.
What Lies Ahead?
Despite the growing debt burden, Kenya has maintained a relatively healthy reserve buffer, which has enabled it to meet its foreign obligations on schedule. However, the sustainability of this approach is now being questioned, especially amid a global economic slowdown, volatile currency markets, and slow domestic revenue collection.
Going forward, fiscal experts are urging the government to:
- Pursue concessional and low-interest loans
- Renegotiate or restructure unsustainable debt
- Improve domestic tax collection
- Freeze or strictly monitor non-priority borrowing
For now, the July repayment of KSh 68.7 billion is a reminder of Kenya’s commitment to honoring its financial obligations — but it also raises urgent questions about the cost of that commitment for ordinary citizens.
