Kenya’s domestic debt burden has deepened sharply, with servicing costs crossing the KSh 1 trillion mark for the first time in FY 2024/25.
- •Data from the Controller of Budget shows that the government spent KSh 1.05 trillion on domestic debt repayments, up 25.9% from KSh 830.2 billion in FY 2023/24.
- •The increase was driven mainly by rising interest payments on Treasury bonds and bills.
- •The domestic debt servicing bill was split into KSh 678.3 billion in interest and KSh 366.8 billion in principal repayments, compared to KSh 534.2 billion and KSh 296.0 billion respectively in the prior year.
- •Interest now makes up about 65% of the domestic servicing burden, reflecting the cost of heavy reliance on short-term debt instruments in a high interest rate environment.
- •Over the last six years, domestic debt servicing has nearly doubled:
| Year | Interest (KSh Bn) | Principal (KSh Bn) | Total (KSh Bn) | YoY % Change |
|---|---|---|---|---|
| 2019/20 | 301.81 | 223.68 | 525.49 | — |
| 2020/21 | 374.11 | 157.21 | 531.32 | +1.1% |
| 2021/22 | 386.52 | 155.28 | 541.80 | +2.0% |
| 2022/23 | 454.95 | 306.54 | 761.49 | +40.5% |
| 2023/24 | 534.22 | 296.01 | 830.23 | +9.0% |
| 2024/25 | 678.25 | 366.80 | 1,045.05 | +25.9% |
In FY 2024/25, domestic debt service absorbed 43.6% of revenues, far above the IMF’s recommended ceiling of 30%.
Rising Stock and Shifting Debt Mix
As of June 30, 2025, Kenya’s total public debt stock stood at KSh 11.73 trillion, with KSh 6.34 trillion (54%) in domestic debt and KSh 5.40 trillion (46%) in external debt. This marks a 17% jump in domestic debt from KSh 5.41 trillion in June 2024, diverging from the government’s Medium-Term Debt Strategy that had set a balanced 50:50 borrowing mix.
The debt-to-GDP ratio for domestic obligations rose to 35% in FY 2024/25, from 33.6% in the previous year.
Composition and Holders
Domestic debt remains dominated by long-term Treasury bonds, but short-term Treasury bills are growing in share, raising refinancing risks.
| Instrument | Jun 2024 (KSh Bn) | % | Jun 2025 (KSh Bn) | % |
| Treasury Bonds | 4,627.1 | 85.5 | 5,124.1 | 81.0 |
| Treasury Bills | 615.9 | 11.4 | 1,005.8 | 15.9 |
| CBK Overdraft | 61.0 | 1.1 | 88.0 | 1.4 |
| Pre-1997 Debt | 17.2 | 0.3 | 22.0 | 0.3 |
| IMF On-Lending | 83.5 | 1.5 | 80.0 | 1.3 |
| Others | 5.6 | 0.1 | 6.1 | 0.1 |
| Total | 5,410.3 | 100 | 6,326.0 | 100 |
Commercial banks are the largest holders of domestic debt, controlling 42.6% as of June 2025. Pension funds hold 28.6%, insurance companies 7.2%, and the Central Bank 1.5%.
| Holder | Jun 2024 (KSh Bn) | % | Jun 2025 (KSh Bn) | % |
| Commercial Banks | 2,278.8 | 42.1 | 2,694.9 | 42.6 |
| Pension Funds | 1,552.5 | 28.7 | 1,809.2 | 28.6 |
| Insurance Companies | 379.1 | 7.0 | 455.5 | 7.2 |
| Central Bank | 86.6 | 1.6 | 94.9 | 1.5 |
| Other Investors | 1,113.3 | 20.6 | 1,271.5 | 20.1 |
| Total | 5,410.3 | 100 | 6,326.0 | 100 |
The Controller of Budget has cautioned that Kenya’s growing reliance on short-term Treasury bills increases refinancing pressure and exposes the government to interest rate volatility. Critics argue that heavy domestic borrowing risks crowding out private sector credit, while ballooning interest payments reduce fiscal space for development spending.
Looking ahead, projections show that domestic debt servicing will climb to KSh 1.31 trillion in FY 2025/26, nearly 40% of expected revenues.
