The National Treasury has announced a strategic fiscal roadmap aimed at slowing the growth of Kenya’s public debt while addressing a significant budget deficit of Ksh 923 billion for the Financial Year 2025/26. Cabinet Secretary for Treasury and Economic Planning, John Mbadi, made the pronouncement before the National Assembly while unveiling the Ksh 4.29 trillion budget.
To bridge the fiscal gap, the government plans to borrow Ksh 287.7 billion from external sources equivalent to 1.5% of GDP and an additional Ksh 635.5 billion domestically, accounting for 3.3% of GDP. Mbadi emphasized that the borrowing strategy will prioritize concessional loans from multilateral and bilateral partners and limited commercial borrowing, including international bond issuances.
In a shift towards more sustainable and diversified funding, the Treasury also plans to tap into emerging financial instruments such as debt swaps, diaspora bonds, sustainability-linked bonds, and Environmental, Social, and Governance (ESG) instruments. “This strategic approach will not only diversify our financing options but also strengthen international partnerships and promote sustainable growth,” Mbadi stated.
To promote transparency and accountability, the Treasury is integrating the Commonwealth Meridian Debt Management system with the Integrated Financial Management Information System (IFMIS) and the Central Bank of Kenya’s core banking systems. An independent audit of public debt by the Auditor General is underway and is expected to be shared with Parliament upon completion.
Public debt is currently estimated at 63% in present value terms. Mbadi assured the House that the Treasury’s fiscal reforms are projected to bring it down to 55% in the medium term, aligning with sustainability benchmarks.
Additionally, the government is exploring Shariah-compliant financing, following the successful issuance of Kenya’s first Sukuk Bond, which raised Ksh 3.2 billion for affordable housing.
These initiatives are part of broader fiscal consolidation efforts aimed at reducing the deficit from 5.3% of GDP in FY 2023/24 to 2.7% by FY 2028/29, a move seen as critical to stabilizing the economy and maintaining investor confidence.
