Kenya’s external debt average time to maturity and grace period shortened as the country saw a reduction in the share of bilateral loans that feature longer breathing room and repayment duration.
New data from the Treasury shows the average maturity of new external debt shortened to 15.6 years in the year to June 2025 from 20.5 years a year earlier.
The grace period-the time before debt service starts-meanwhile fell to 3.7 years from 4.4 years.
The average interest rate for new external debt, however, dropped to 4.3 percent from 4.6 percent previously, resulting in a lower debt service burden amid a stable shilling. The external loans are typically denominated in hard currencies such as the United States dollar and euro.
The trend shows Kenya will have a shorter time to repay contracted foreign debt while having less breathing room to the start of interest payments.
‘The average maturity of new external debt shortened to 15.6 years at the end of June 2025, down from 20.5 years in June 2024,’ the Treasury said.
‘Over the same period, the weighted average interest rate declined from 4.6 percent to 4.3 percent, while the average grace period eased slightly to 3.7 years from 4.4 years.”
The average maturity for new external debt is the lowest since June 2019 while the grace period is the shortest since at least 2017.
The grace period is usually mostly contained in official bilateral and multilateral loans from institutions such as the International Monetary Fund and the World Bank.
During the period under review, outstanding bilateral debt fell by Sh51 billion to Sh1.11 trillion in June 2025 from Sh1.16 trillion a year earlier.
At the same time, multilateral and commercial debt surged by Sh259 billion and Sh105 billion, respectively.
Total multilateral debt topped Sh3.04 trillion from Sh2.78 trillion, while commercial debt rose to Sh1.31 trillion from Sh1.2 trillion.
Combined, total external debt climbed to Sh5.48 trillion in June 2025 from Sh5.17 trillion previously.
Treasury has been focusing on operations to smoothen the debt maturity profile by spreading repayment obligations over a longer horizon and easing near-term refinancing pressures even as new debt sustainability metrics come under pressure.
In February last year, the Treasury issued a new Sh193.5 billion ($1.5 billion) Eurobond maturing in 2036 and used part of the proceeds to repurchase Sh74.7 billion ($579 million) of the Sh116.1 billion ($900 million) Eurobond due next year.
Last year, Kenya also extended the term of three Chinese loans used for the construction of the standard gauge railway (SGR) from 2029 to 2040.
Treasury said it had negotiated new terms that turned the loans into a 15-year-old facility that includes a five-year grace period.
The extension is part of a conversion of three dollar-denominated loans into yuan, a move estimated to save Kenya about Sh27.7 billion ($215 million) a year in interest payments.
Treasury is betting on a variety of strategies to manage external debt with the primary goal of easing refinancing pressures, which involves both the extension of loan tenor and the push for lower interest rates. It has also issued new public debt management initiatives to contain the growing debt burden.
‘The reforms include the review of the debt and borrowing policy to bring on board new developments in debt management such as derivatives, liability management operations and associated instruments such as swaps, forwards and options and associated risks,’ the Treasury stated.