Kenya’s insatiable appetite for loans has added 36 new foreign debts worth Sh898 billion to its books during the 2023-2024 fiscal year, according to the Africa Centre for Open Governance (AfriCOG).
The report indicates the loans were sourced from 27 multilateral lenders, six commercial banks, and three bilateral financiers.
The Central Bank of Kenya disclosed that the country’s public debt stood at Sh10.8 trillion as of September 2024, with external debt accounting for Sh5.55 trillion as of December 2023.
This figure represents 35 per cent of the gross domestic product (GDP), which stands at Sh14.6 trillion.
Speaking at the release of the report, AfriCOG Executive Director Gladwell Otieno criticised the government for what she termed as a lack of transparency in debt acquisition.
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“Even Parliament is kept out of the loop. The principle of ‘no taxation without representation’ implies ‘no borrowing without representation’. Parliament must use its authority to control the Executive’s appetite for debt contracting and ensure the reduction of foreign loan costs,” Otieno said.
AfriCOG aligned its recommendations with those of the World Bank, which has urged countries to enhance debt transparency by maintaining detailed, year-end loan-by-loan accounts of outstanding balances and transactions.
Multilateral Lenders Dominate Kenya’s Debt
AfriCOG’s report revealed that multilateral lenders hold 55 per cent of Kenya’s external debt. The World Bank leads with a 30 per cent share, followed by the African Development Bank with 10 per cent. Bilateral creditors, led by China at 16 per cent, account for 23 per cent.
Other significant bilateral lenders include Japan (3 per cent) and France (2 per cent). Private creditors hold the remaining 22 per cent, with 18 per cent owed to bondholders and 3 per cent to commercial entities.
The World Bank’s International Debt Report noted that Kenya borrowed less from private creditors in 2023 compared to the previous five years.
However, borrowing costs from private creditors increased sharply, with interest rates rising from 6 per cent in 2022 to 10 per cent in 2023. Simultaneously, loan maturity periods were halved from 11 years to five years.
In contrast, official creditors provided loans with more favourable terms in 2023, including lower interest rates of 4 per cent and longer repayment periods averaging 18 years.
Mounting Debt Servicing Costs
Kenya’s debt repayment obligations are considerable. AfriCOG reported that principal repayments exceeded Sh500 billion in 2023, with an additional Sh330 billion due in 2024. The country faces even greater challenges ahead, as over Sh1.5 trillion in repayments are scheduled between 2025 and 2027.
The World Bank stated that global debt-service payments reached a record $1.4 trillion in 2023, with interest payments alone accounting for $406 billion.
“The squeeze on the poorest and most vulnerable countries—those eligible to borrow from International Development Association (IDA)—has been especially fierce. Their interest payments on external debt have quadrupled since 2013, hitting an all-time high of $34.6 billion in 2023,” the report stated.
Austerity Measures and Fiscal Struggles
Kenya’s fiscal troubles worsened following the rejection of the 2024 Finance Bill, which proposed new taxes to increase revenue for debt servicing. Despite introducing austerity measures, the government continues to face financial turbulence.
The World Bank advised Kenya to rely on official creditors offering favourable terms to mitigate financial risks. However, with mounting debt obligations, Kenya faces the risk of diverting resources from critical sectors such as health and education to meet its repayment needs.
As AfriCOG emphasised during the report launch, public scrutiny of debt practices and stronger parliamentary oversight could help temper the Executive’s borrowing tendencies. “Parliament must use its authority to control the Executive’s appetite for debt contracting,” Otieno reiterated.
With its rising debt burden and fiscal pressures, Kenya’s path to financial stability remains uncertain, raising questions about the sustainability of its borrowing practices.
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