The Treasury will use proceeds from a Sh129 billion ($1 billion) debt-for-food security swap to make early repayments on outstanding Eurobonds to ease Kenya’s heavy debt burden.
The Public Debt Management Office (PDMO), a directorate of the Treasury, says it will use proceeds from the debt swap to retire early costly sovereign bonds that are maturing from 2031.
The plan is expected to work similarly to the debt-for-nature swaps carried out by several countries in recent years that offered lower interest rates in exchange for nature protection.
A debt-for-food swap would likely allow Kenya to replace costly existing debt with lower-cost financing on condition that the country channels the savings towards programmes to boost food security.
Kenya has identified the early repayment of costly Eurobonds as part of the debt-for-food security swap, with five of the seven sovereign bonds maturing between 2031 and 2048 as its target.
‘The targeted transaction in liability management this year is that we are working on a debt for food security swap, which we expect to conclude by the end of this financial year,’ said Raphael Owino, the director-general at the PDMO.
‘We are getting a guarantee from the US-DFC [United States International Development Finance Corporation], which will enable us to issue an instrument in the financial market at a fairly good rate, and then we can use that to take out either a Eurobond or some other expensive commercial borrowing.’
Kenya has Eurobonds worth Sh872.2 billion, including two that will mature in 2027 and 2028 and are not part of the swap. The outstanding amount of the two bonds is Sh72.4 billion.
The Eurobonds will cost taxpayers Sh84.73 billion in interest payments for the year ending June, up from Sh73.89 billion a year earlier.
Under a debt-for-food swap, the guarantor- the US-DFC will help Kenya raise a new instrument in the international capital markets at a cheaper rate.
The Eurobonds pay an interest or return of between 6.08 percent and 8.8 percent. The new debt targeted under the swap deal could come with interest rates of below 3.0 percent, analysts says.
In early December 2025, President William Ruto confirmed that the US-DFC had agreed to proceed with the debt-for-food security swap and expected the arrangement to significantly ease Kenya’s repayment burden by replacing expensive existing loans with cheaper financing.
‘We appreciate DFC for agreeing to proceed with the $1 billion debt-for-food security swap to allow us to replace costly existing debt with lower-cost financing,’ President Ruto posted on social media.
The DFC is the United States’ flagship development agency.
Debt-for-food security swaps represent a new way the Treasury is seeking to ease the effects of Kenya’s mounting public debt.
The country has been working to cut its overall debt, which stands at close to 70 percent of its GDP, and make repayments more manageable.
The government has revamped its debt maturing management.
Annual debt repayments eat nearly half of taxes, leaving little cash for projects that are critical for revving up economic growth and easing the growing youth unemployment.