Crisis, budget pressure as debt stock hits Sh11tn

The country’s debt crisis could be turning for the worse with new revelations indicating the stock is past the Sh11 trillion mark.

Latest disclosures by the National Treasury indicate the public debt stood at Sh11.02 trillion as of end of January this year.

Domestic comprised of Sh5.93 trillion while foreign lenders were owed Sh5.09 trillion in the review period, translating to 65.7 per cent of gross domestic product.

MPs have warned the situation wouldn’t get better, especially with debt service obligation set to increase to Sh2.47 trillion by June 2027.

Some Sh1.87 trillion was paid in the current financial year, with the projected figures set to keep the proportion of revenue to debt repayment at above 60 per cent.

Economic experts say this loosely means that for every Sh100 the government collects as revenue, only Sh40 is left for operations, salaries and development.

“This growing debt is likely to limit fiscal flexibility for other essential expenditures,” the National Assembly Liaison Committee said in a report.

The committee chaired by Deputy Speaker Gladys (Uasin Gishu) said they project the debt repayment pressure is likely to persist through 2027.

MPs have further cautioned the government against relying on loan financing to bridge the fiscal deficit. “Relying on loan financing will contribute to the continued rise in public debt, which has already breached the record levels,” the committee said.

The report comes hot on the heels of findings by the Controller of Budget that the government has breached the limits set in law.

The law says the debt should not exceed 55 per cent of the country’s gross domestic product, which Treasury estimated at Sh16 trillion in September 2024.

Controller of Budget Margaret Nyakang’o recommended further cuts in spending to reduce the budget deficit financing.

“Borrowing should only be undertaken to finance productive projects. The National Treasury should pursue economic policies that support accelerated economic growth to enable the country to grow out of debt in the long run,” she said.

The conclusion by MPs – and the Controller of Budget thus begs the question on how the Kenya Kwanza administration would fund the next budget.

President William Ruto’s administration intends to borrow Sh831 billion to fund shortages in the next financial year’s budget.

Treasury says in the 2025 Budget Policy Statement that it would borrow Sh684 billion locally and Sh146 billion from foreign lenders. But MPs say it is time the National Treasury looked at alternative sources to finance the budget deficit.

“It is crucial to explore alternative non-debt financing mechanisms to fund government expenditures while mitigating the growth of public debt,” the committee said.