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Home Economy

Kenya’s debt dilemma

Kevin Cheruiyot by Kevin Cheruiyot
May 2, 2025
in Economy
Reading Time: 2 mins read

Kenya is grappling with a significant debt burden, prompting debates on whether to pursue debt restructuring. The country’s public debt has escalated, with the debt-to-GDP ratio reaching 67.4% by the end of second quarter of 2024/25 according to report by Central Bank of Kenya.

To address the mounting debt, the Kenyan government has implemented fiscal consolidation measures. On 29th April 2025, it announced plans to cap the fiscal deficit at 4.5% of GDP for the 2025/26 fiscal year, down from 5.1% the previous year and revise its initial budget of KES 4.3 trillion.

Kenya has also engaged with the International Monetary Fund (IMF), seeking a new support package after abandoning the final review of a USD 3.6 billion program.

Debt servicing consumes a significant portion of Kenya’s revenue, with 63.8% of revenues are allocated to debt service as of March 2025, 33.8% points higher than the IMF threshold of 30.0%. This allocation limits funds available for development projects and essential services.

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Experts recommend diversifying funding sources to manage debt sustainably. The Kenya Institute for Public Policy Research and Analysis (KIPPRA) suggests exploring financing from multilateral institutions and development partners to reduce reliance on a few bilateral lenders and commercial creditors.

Public discontent over economic measures, including tax increases and subsidy removals, has led to protests and political pressure. In response, President William Ruto has defended the measures as necessary for economic stability.

Kenya’s debt situation remains complex, with the government balancing fiscal consolidation efforts, public sentiment, and the need for sustainable economic growth.

Kenya stands at a critical crossroads in its economic journey, where decisions on debt restructuring and fiscal policy will shape the country’s financial future. While the government’s commitment to reducing the fiscal deficit and engaging with international partners signals a proactive approach, the growing debt burden and public dissatisfaction underscore the urgency for balanced, inclusive solutions. To ensure long-term sustainability, Kenya must not only manage its debt obligations but also foster economic resilience through diversified financing, improved revenue collection, and policies that protect vulnerable populations.

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