Debt repayments are set to consume nearly four out of every five shillings collected in taxes and other ordinary government revenue in the current financial year ending June 30, 2027, tightening the squeeze on funding for public services, development projects and other public spending.
The National Treasury projects total debt service at Sh2.30 trillion in the year to June 2027, equivalent to 79.8 percent of ordinary revenue, increased from 72.4 percent last financial year.
This means the share of revenue going towards debt repayments will rise by 7.4 percentage points in a single year, highlighting the growing pressure debt obligations are placing on the Government’s finances.
The Treasury projects in the latest Annual Public Debt Management Report that total debt service will rise by about 23 percent to Sh2.301 trillion in the current financial year ending June 2027 from Sh1.875 trillion last year.
The Sh426.2 trillion increase means that a larger share of taxes will go towards servicing past borrowing, intensifying pressure on the budget as the Government struggles to balance debt obligations against competing expenditure needs.
‘Public debt service is projected to remain a significant component of the Government’s expenditure over the medium term,’ the Treasury writes in the report.
Interest payments will account for the biggest share of the burden, rising to Sh1.295 trillion from Sh1.075 trillion in the year ended June. The interest bill will absorb 44.90 of projected ordinary revenue of Sh2.884 trillion.
Domestic interest payments are projected to jump to Sh1.027 trillion from Sh862.7 billion, while interest on external debt will rise to Sh267.5 billion from Sh211.8 billion.
The Treasury will be looking to redeem domestic Treasury bonds of Sh463.5 billion and another Sh542.9 billion to meet external principal repayments by June 2027, adding to pressure on its finances.
The squeeze is expected to persist beyond next year, with debt service projected to rise to Sh2.535 trillion in 2027/28 and Sh2.562 trillion in 2028/29.
As a share of ordinary revenue, the burden is forecast at 79 percent in 2027/28 and 72 percent in 2028/29, before easing to 64.7 percent in 2029/30.
The Treasury attributes the decline in coming years to ‘the expected improvement in revenue performance and the moderation of debt service obligations’.
The projections underline a deterioration in the share of revenue available for other spending. Debt servicing costs consumed 47.9 percent of Government revenue in 2021/22, rising to 58.9 percent in 2022/23 and 69.1 percent in 2023/24.
The ratio climbed further to 71.2 percent in 2024/25 and 72.3 percent in 2025/26, according to the report.
The growing burden has persisted despite efforts to spread out repayments and reduce the risk of refinancing large amounts of debt at once.
During the year ended June 2026, the government issued a $2.25 billion (about Sh292 billion) Eurobond and retired part of its 2028 and 2032 Eurobond obligations through a tender offer. Domestic bond switches and buybacks amounted to Sh66.8 billion during the year.
The Treasury says these operations were aimed at ‘reducing refinancing risk and smoothing the public debt redemption profile’.
However, the report shows that refinancing vulnerabilities remain, particularly in the domestic debt portfolio.
Debt falling due within one year stood at 12.7 percent of total debt, above the 11.9 percent target, while the average maturity of domestic debt fell to seven years against a target of 8.3 years.
The Treasury attributed the higher refinancing risk to ‘higher issuance of short-term domestic securities’.
Kenya’s public debt stood at Sh13.12 trillion at the end of June 2026, equivalent to 70.4 percent of gross domestic product. While the Treasury considers the debt sustainable under its baseline assumptions, it acknowledges significant risks.
‘Kenya’s overall and external public debt remains sustainable but at high risk of distress,’ the report says.