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Kenya spent Ksh490.5 billion on public debt obligations during the first quarter of the 2026/2027 financial year, taking up a large share of the money collected through taxes. The payments represented 77.6 per cent of the Ksh631.8 billion in tax revenue collected by September 30, according to figures from the National Treasury.
The figures highlight the pressure debt repayments continue to place on government finances as the country implements its annual budget. They also raise questions about the amount of revenue remaining for other public expenditure after debt obligations are met.
Debt Servicing Takes Up Most Tax Revenue
The government’s original budget estimates projected Ksh2.316 trillion for public debt servicing in the 2026/2027 financial year. Against expected tax collections of Ksh2.859 trillion, the projected payments would account for approximately 81 per cent of annual tax revenue.
The first-quarter figures therefore show that debt-related payments are consuming a substantial portion of the government’s main revenue source. The figures cover the opening three months of the financial year, rather than the full annual budget period.
Kenya’s Public Debt Exceeds Ksh13 Trillion
The National Treasury’s June 2026 Public Debt Bulletin placed Kenya’s public debt at approximately Ksh13.12 trillion by the end of that month. Domestic debt accounted for Ksh7.327 trillion, while external borrowing stood at Ksh5.794 trillion.
Multilateral institutions made up the largest share of external debt, accounting for 54.9 per cent. The International Development Association was the biggest individual multilateral lender, with approximately Ksh1.77 trillion owed, followed by the African Development Bank and African Development Fund at Ksh565.29 billion.
Commercial borrowing accounted for 26.8 per cent of external debt, including Ksh1.36 trillion in international sovereign bonds. Bilateral lenders represented another 17.1 per cent, with China accounting for the largest share among individual countries in that category.
Moody’s Flags High Interest Payment Burden
Kenya’s debt obligations have remained a concern amid public debate over taxation, government spending and the cost of borrowing. Moody’s upgraded the country’s local- and foreign-currency credit ratings from Caa1 to B3 in January 2026, maintaining a stable outlook.
The rating improvement did not remove concerns over the cost of servicing debt. Moody’s projections cited in the report indicate that interest payments could absorb about 35 per cent of government revenue in 2027, placing Kenya among countries facing a heavy interest burden.
Treasury Explores Debt Refinancing Options
Kenya is also discussing a proposed Ksh129.7 billion debt swap being organised by a United States banking institution. The transaction is intended to refinance existing obligations on more favourable terms and could form part of a wider Ksh700 billion external financing programme for the financial year ending June 2027.
Debt refinancing can help governments manage repayment schedules and large maturities, but it does not automatically reduce the total amount owed. The impact will depend on the terms secured and the costs associated with the transaction.
As the financial year progresses, the government’s ability to raise revenue and manage debt costs will remain important to its spending plans. The latest figures underline the scale of the resources required to meet existing obligations while financing other public services and development priorities.
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