The National Treasury’s Annual Borrowing Plan for FY’2026/27, published on 24 August 2026, confirms the deficit target at Kshs 1.1 tn which is 5.5% of GDP, financed mainly through domestic borrowing which came at Kshs 898.0 bn net domestic against Kshs 247.2 bn net external. The medium-term goal remains a decline to 3.3% of GDP by FY’2028/29. The design is credible. The delivery record is mixed, and it has moved since June in both directions.
Kenya’s nominal debt-to-GDP ratio stood at 67.8% and the present-value ratio at 65.3% as of June 2025, both down from the 72% peak at end-FY’2022/23. KRA closed FY’2025/26 with a record Kshs 2.8 tn collected, up 10.6% and tax revenue landed within Kshs 7 bn of its revised target by year-end, a sharp improvement on the Kshs 161.9 bn gap reported as of March. The domestic-financing tilt has held through the new fiscal year’s borrowing plan, continuing to shield the debt stock from currency risk.
The debt stock kept climbing in nominal terms regardless: KSh13.013 trillion at end-June 2026, up 9.2% year-on-year, consistent with the IMF’s April 2026 projection of the ratio rising to 71.6% of GDP in 2026. Debt servicing consumed roughly 69% of ordinary revenue in FY’2024/25 which is more than double the IMF’s 30.0% sustainability benchmark. The near-target revenue close also came against a downwardly revised full-year target and a late Q4’2025 surge, not sustained in-year performance, domestic tax alone still landed at just 93.0% of its own Kshs 2.0 tn goal. And July 2026, the first month of the new fiscal year, previewed the same imbalance: debt service absorbed KSh113.75 billion of exchequer releases, nearly four times the KSh29.33 billion spent on development across all ministries.
The bottom line is deficit path is still well-conceived, and revenue collection genuinely improved through FY’2025/26. But the improvement came from a lowered bar and a Q4 push, while the debt stock and its servicing cost kept growing faster than the consolidation is narrowing them. Until debt service stops outpacing development spending on a sustained basis, 3.3% by FY’2028/29 remains a stated intention. (Start your investment journey today with the cytonn MMF, call+2540709101200 or email sales@cytonn.com)
