The World Bank has raised alarm over Kenya’s escalating debt levels, warning that the country is at a high risk of debt distress. In its latest Kenya Economic Update released this week, the lender revised Kenya’s gross domestic product (GDP) growth forecast downwards from 4.9% to 4.5% for 2024, citing fiscal vulnerabilities and the need for urgent economic reforms.
“Kenya is at high risk of debt distress and decisive reforms are urgently needed to keep debt sustainable while promoting growth and jobs,” said Qimiao Fan, the World Bank’s Division Director for Kenya, Rwanda, Somalia, and Uganda.
The downgrade reflects growing concerns over the country’s fiscal trajectory, with mounting debt repayments placing increasing pressure on public finances. According to the report, Kenya’s public debt-to-GDP ratio has surged in recent years, driven by borrowing to finance infrastructure projects and plug budget deficits. This has left the country more exposed to external shocks, such as global interest rate hikes and currency depreciation.
The World Bank emphasized that Kenya must implement bold reforms to stabilize the economy. These include improving domestic revenue collection, curbing non-essential public spending, and enhancing public investment efficiency. Additionally, the lender recommended greater transparency in public borrowing and stronger debt management mechanisms.
While the Bank acknowledged the government’s efforts to raise revenue through recent tax measures, it cautioned that the current strategy might stifle private sector growth and consumer demand if not carefully balanced. The lender called for a more equitable and growth-friendly fiscal framework that supports job creation and addresses poverty.
The downgrade adds to mounting pressure on President William Ruto’s administration, which is already facing public backlash over the high cost of living and proposed tax increases. Youth-led protests and civil society groups have demanded greater accountability in the use of public funds and a more inclusive economic recovery strategy.
As Kenya continues to engage with international lenders and development partners, the path forward will require a delicate balancing act one that maintains macroeconomic stability while ensuring that the burdens of reform do not fall disproportionately on the most vulnerable.
