Kenya’s public debt has surged to Sh10.8 trillion, as reported by the Central Bank of Kenya (CBK) in its latest September 2023 data.

This represents a 5 per cent increase from Sh10.3 trillion at the start of the year, marking a grim milestone for the country’s economic stability.

The debt crossed the Sh10 trillion statutory ceiling in June 2023, just a year after Parliament had set the limit. To address the escalating figures, lawmakers approved a shift from a fixed debt ceiling to a more flexible model pegged to GDP.

The new framework places the public debt threshold at 55 per cent of GDP in present value terms, with a buffer of up to 60 per cent to accommodate current realities.

This transition aligns with International Monetary Fund (IMF) guidelines but complicates adherence to the East African Community’s target of a 50 per cent debt-to-GDP ratio.

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While these adjustments aim to bring stability, the country faces rising costs tied to its growing debt.

According to the National Treasury, Kenya spent Sh1.59 trillion servicing domestic and external debt in the financial year ending June 2024—an increase of Sh435 billion from the previous year.

A weaker shilling has only added to the burden, pushing debt servicing costs to consume 68.3 per cent of ordinary revenue, up from 58.8 per cent the previous year.

President William Ruto voiced concerns in February 2023, highlighting how this strain affects essential services.

“For every Sh10 Kenya Revenue Authority (KRA) collected, Sh7 was going to debt servicing,” he noted, underlining the constraints placed on funding critical sectors like education and healthcare.

Kenya’s fiscal dilemma mirrors a global challenge. The World Bank’s latest International Debt Report reveals that developing nations collectively spent $1.4 trillion on foreign debt servicing in 2023, driven by soaring interest rates that reached a two-decade high.

“This surge in debt servicing has put immense pressure on national budgets, forcing governments to scale back on vital public services,” the World Bank stated.

It further explained that this trend has forced many countries, including Kenya, to make difficult trade-offs, often at the expense of investments in health, education, and environmental protection.

As the country grapples with its towering debt, the growing financial strain raises critical questions about its ability to balance immediate fiscal needs with long-term developmental goals.

Whether the shift to a GDP-linked debt framework will provide a solution or further complicate matters remains to be seen.