Kenya has witnessed a substantial increase in its debt levels in recent years. According to the Central Bank of Kenya, the total public debt was KSh 11.8 trillion as of June 2025, equivalent to approximately 67.8% of GDP. Interest payments are projected at KSh 1.1 trillion in FY2025/26.
The rising debt burden poses serious economic risks, including concerns about the country’s fiscal sustainability and the ability to meet its debt obligations. It erodes investor confidence by creating a climate of uncertainty , fear, and risk.
Furthermore, repaying government loans at a higher interest rate puts additional strain on the government’s finances. Foreign direct investment (FDI) and other forms of international capital flows can dry up as foreign investors become wary of the country’s economic instability. The country may lose access to international capital markets, making it difficult to refinance its debt and fund future growth.
The risk of defaulting is high if the government fails to adopt stringent measures to manage borrowing.
Key issues contributing to the debt crisis
Kenya’s looming debt crisis is a complex issue driven by a mix of factors.
First, the government borrows heavily to finance its budget deficit rather than generate long-term returns. A significant portion of the debt is used to cover recurrent expenditures.
Second, the widespread corruption contributes to public debt by diverting funds from productive uses such as infrastructure and education. Corruption also discourages domestic and foreign investment by creating uncertainty and eroding trust in the economic systems.
Third, a significant portion of the spending on loans is questionable. The numerous stalled or delayed projects mean the borrowed funds do not generate the intended economic returns.
Additionally, the country’s high public debt leads to higher borrowing costs as lenders perceive the country’s credit environment to be riskier. The reliance on high-interest loans has made debt servicing a heavy burden on the national budget.
Major social issues like widespread gambling, broken or dysfunctional families, education inequality, and poverty have a significant effect on Kenya’s national debt. If left unaddressed, these social issues harm the country’s economic productivity and growth. Programs targeting these issues require a substantial portion of the government budget, which indirectly affects the national debt.
Another key factor contributing to the crisis is the lack of evidence-based debt management, mainly due to the lack of comprehensive, accurate, and timely data. Kenya, similar to other African countries, oftentimes relies on data from third-party organizations like the International Monetary Fund (IMF), the World Bank, and other international agencies. Most of this data is outdated or does not reflect the reality on the ground, leading to ineffective policies and investment of borrowed funds.
Lastly, long-term economic planning exists on paper, but execution is inconsistent. Kenya’s long-term planning is often disrupted by frequent changes in political priorities. Thus, borrowing often serves short-term needs.
Key Options for Resolving Kenya’s debt crisis
Here are several strategies the government should apply to solve its current debt crisis.
Cut government recurrent expenditure
The rising debt is mainly driven by the persistent fiscal deficit arising from high government spending. The recurrent expenditure as a percent of total government expenditure has increased significantly over the past years, squeezing funding for development projects. In the 2024/25 fiscal year, recurrent expenditure stood at approximately Ksh 2.781 trillion, representing 15.4% of the country’s GDP. The high recurrent expenditure is primarily attributed to our expensive system of governance.
To address the debt crisis, the government should streamline operations and improve efficiency in public health service delivery by adopting technology and automation. Reducing the number of ministries and state departments will also go a long way in cutting government expenditure. Pay cuts for government staff are also important. Reducing recurrent expenditure would allow the government to reallocate resources to critical sectors like agriculture, transport, energy, health, and education.
Expand investment in mining and leather/textile industries
Given full attention, the mining, textile, and leather industries have the potential to spur economic growth and create jobs, particularly for our young people. The government can generate more revenue by expanding the exploration and extraction of our mineral resources. Transparency and sustainable management are key to optimal natural resource utilization.
Stop corruption
Corruption, at the national and country level, limits Kenya’s economic growth. It leads to the misallocation of borrowed funds, reduced returns, and unjust enrichment of a few people. Artificial intelligence (AI) can help fight corruption in areas such as procurement by detecting irregularities and conflicts of interest. This can reduce government expenditure and ensure borrowed funds are spent on projects with high economic returns.
Recover stolen funds
The government must strive to recover stolen funds. Such a move would deter corruption by sending a strong message that corruption will not be tolerated. Additionally, the recovered funds can be used to pay our debt or finance development projects.
Improve ease of doing business
The government’s economic plan should incorporate clear measures to improve the ease of doing business in the country. Key measures to achieve this include reducing tax rates and simplifying and streamlining the process of starting and running a business. Providing a competitive and attractive business environment is crucial for fostering innovation, productivity, and economic growth.
Reduced taxes increase disposable income for individuals and households, leading to increased economic activity and higher tax revenues. The government should avoid exploitative, oppressive, and extractive taxes that trigger tax evasion and avoidance.
Transparency and accountability
Disclosure of critical information about public debt is crucial. This includes the disclosure of loan contracts to the public, allowing them to examine the details of the contracts. Transparency ensures responsible borrowing since the government will be held accountable for questionable loan contracts. It also ensures loans are utilized for projects with significant economic returns. Citizens must contribute to decisions on public debt acquisition and spending.
Strategic investment of loan money
The government should only invest loan money in projects with clear economic benefits. Thorough feasibility studies are crucial before seeking loans to ascertain the project’s capacity to promote the country’s long-term economic growth. Investing in projects without economics only enriches a few people while increasing our debt burden.
Increase the country’s exports
The government should work to increase exports through strategic investment in manufacturing. This should be supported by strategies such as diversification of export markets, strengthening of trade policy, reduction of export duties, and improvement in logistics and trade facilitation. An increase in our exports will increase revenue for the country through foreign exchange earnings, which will stabilize the shilling.
Ban gambling, and get young people working
Gambling puts immense pressure on our economy and indirectly contributes to our rising debt. Recent media reports suggest that Kenyans placed bets amounting to KSh 766 billion in 2024. A huge proportion of that amount is withdrawn from our economy, causing a string of other issues, such as reduced money supply and widespread closure of businesses. The adverse social consequences of gambling, including family breakdowns and health-related issues, contribute to increased government expenditure on social programs, creating the need to borrow in the long run. By banning gambling, we can improve young people’s contribution to the real economy, which translates to increased revenue for the government.
Promote marriage and stable families
Stable families set a strong foundation for improved economic productivity and growth. Key advantages of stable families include improved human capital development, reduced social costs, increased labor participation, and increased entrepreneurship or innovation due to improved financial stability. Having stable families and a skilled workforce ensures the investments from borrowed funds yield significant economic returns, making repayment easier. The Kenyan government, in partnership with the Church and stakeholders in the private sector, has established an initiative to strengthen families and promote marriage. Also, the government must review and amend labour migration to protect family institutions.
Long-term planning
Long-term planning is central to effective national debt management. Borrowed funds should be used to finance large projects that will benefit future generations, such as major highways, airport construction, or energy projects. This way, the cost of the infrastructure is shared by future users, not just current taxpayers.
Final thoughts
Kenya’s looming debt crisis requires attention from our leaders and implementation of key strategic actions. Tackling corruption is a notable step toward achieving debt sustainability. The government must also stop borrowing to fund government spending. Instead, the government must borrow only for market development and long-term infrastructure projects.
Any project funded by borrowed funds must be thoroughly scrutinized to ensure they are worth the investment. We recognize our responsibility to promote debt sustainability and avoid burdening future generations with unmanageable debt. Our approach is to pursue development in a way that is both responsible and sustainable.
