Category: Business Daily

Kenya has reduced malaria prevalence by a third over the past decade as it presses towards its goal of cutting cases and deaths by 90 percent by 2030.

The latest annual report by the World Health Organisation (WHO) shows that malaria prevalence fell from eight percent in 2015 to 5.6 percent in 2025 – a 2.4 percentage point drop, representing the most significant shift in the country’s malaria burden in a generation.

Much of this progress is attributed to the decision to switch to a cheaper and more effective malaria vaccine. In addition to showing 75 percent efficacy against malaria, the newer option is significantly more affordable for the country.

‘Kenya has made significant progress towards the Global Technical Strategy’s goal of reducing malaria cases and deaths by 90 percent by 2030. Malaria prevalence has decreased from eight percent in 2015 to 5.6 percent today,’ the report stated.

The vaccine that changed the numbers

Kenya’s malaria vaccination programme had, for years, relied on RTS,S, the first malaria vaccine to receive WHO approval. The vaccine demonstrated meaningful protection in clinical trials and helped to reduce childhood illness and death. However, its high cost meant that not every child who needed it could access it, even with donor support.

Kenya then switched to the R21/Matrix-M vaccine, developed by the University of Oxford and manufactured by the Serum Institute of India. This vaccine matches RTS,S in terms of efficacy, providing up to 75 percent protection in clinical trials, but costs roughly one-third as much per dose.

For Kenya’s programme, this price difference has been transformative, enabling coverage to expand to 12 additional sub-counties in western Kenya.

‘When we moved to R21, we weren’t just changing a vaccine; we were freeing up resources that had previously been tied up in the cost of the previous one,’ said the Ministry of Health. ‘That freed budget went straight back into nets, drugs, and community.’

The country’s progress has also been supported by stronger bed nets, preventive drugs, expanded treatment, and a new national strategy – all of which have contributed to a response that has measurably shifted the numbers for the first time in years.

Stronger nets to counter resistance

Even as the vaccine transition took hold, Kenya was quietly confronting a threat to one of its most relied-upon tools. Across several high-burden counties, mosquitoes had developed resistance to pyrethroids – the insecticide used in standard bed nets – gradually reducing their effectiveness.

Kenya’s response was to switch to dual-active insecticidal nets, which combine two different active ingredients. A mosquito resistant to one ingredient encounters the second, restoring the protection that resistance had eroded.

The enhanced nets are expected to cover seven million people, with pregnant women and children under five prioritised for distribution.

In total, Kenya has distributed 15.7 million insecticide-treated nets through mass campaigns, making it one of the largest such efforts in the country’s public health history.

‘Over this period, the country distributed 15.7 million insecticide-treated nets through mass campaigns and provided antimalarial treatments to over four million people, demonstrating a strong commitment to the goal of eliminating malaria,’ said the report.

Preventive drugs for the most vulnerable

Kenya has also expanded access to preventive antimalarial drugs, targeting groups most at risk of severe illness or death. Seasonal malaria chemoprevention involves giving young children preventive doses during peak transmission periods.

Similarly, pregnant women receive preventive treatment during routine antenatal visits, integrating malaria prevention into existing healthcare services rather than requiring additional visits.

Both measures target groups that account for the largest share of serious illness and death. They also reduce the number of cases requiring hospital care, easing pressure on a health system already under strain in the eight highest-burden counties.

More than four million people received malaria treatment using artemisinin combination therapy, the WHO-recommended standard of care. This reflects both the remaining disease burden and an expansion of Kenya’s capacity to diagnose and treat cases before they become fatal.

Meanwhile, case management remains a critical part of the response, particularly in areas where prevention coverage is incomplete.

The strategy behind the targeting

The Malaria Policy 2024 and the National Malaria Strategy 2023-2027 replaced a framework that had been in place since 2010, bringing these interventions under a modernised approach.

The most consequential shift lies in resource allocation. Rather than spreading support across all 47 counties, the new strategy directs it to the eight counties bearing the heaviest burden – Siaya, Busia, Homa Bay, Turkana, Migori, Kakamega, Vihiga and Kisumu. These counties account for a disproportionate share of Kenya’s 4.2 million annual malaria cases.

‘These strategic documents will guide Kenya’s malaria response over the next five years, enabling the country to implement updated WHO recommendations, including the deployment of malaria vaccines and other evidence-based interventions,’ the report said.

The ministry has described the shift in targeting as a turning point. ‘We had to be honest about where the disease is prevalent,’ the ministry said at the launch of the new strategy. ‘Resources that chase geography rather than burden do not save lives. We changed that.’

Nationally, 57.3 million people are considered at risk, with pregnant women, children under five, individuals with no prior exposure to malaria and refugees among the most vulnerable.

Despite this progress, Kenya still records 4.2 million malaria cases and 11,000 malaria-related deaths each year. The national target, in line with the WHO Global Technical Strategy, is to reduce cases and deaths by 90 percent by 2030.

The value of bonds traded in the secondary market rose by 49.1 percent in the first three months of this year, compared to a similar period last year to cross the Sh1 trillion mark, as investors hunted for older government paper with higher returns.

Data from the Nairobi Securities Exchange (NSE) shows the value of bonds traded in the quarter ended March 2026 was Sh1.08 trillion compared to Sh724.8 billion over the same period last year.

Falling interest rates on newly issued Treasury bonds and Treasury bills has seen investors seek older higher yielding government securities in the secondary market at the NSE.

Treasury bonds are currently offering returns of between 11 percent to 13 percent from up to 18 percent in 2024.

‘We have been seeing retailers and offshore investors really pushing the secondary market (trading at the NSE),’ said the chief executive of Capital A Investment Bank, Linus Kang’ara.

‘DhowCSD has made transacting of bonds easy, creating traffic,’ he added.

DhowCSD, introduced in July 2023, allows investors to directly purchase Treasury bills and bonds from their smartphones, with the new system shortening the previously lengthy sign-up process.

Data from the Central Bank of Kenya (CBK) shows households held Treasury bills and bonds worth Sh428.8 billion in December 2025, up from Sh365.9 billion a year earlier, signalling increased retailer participation.

DhowCSD also allowed the CBK to improve the classification of holders of government securities, as the platform is able to categorise the ultimate holder of Treasury bills and bonds including those traded in the secondary market.

The volume of government securities held by non-residents grew month-on-month from June last year to Sh311.3 billion as at end of December 2025, with stockbrokers indicating increased activity from the diaspora market in the first quarter of 2026.

The increased bond trading was also attributed to high liquidity in the market, profit taking by investors holding high-yielding securities and repositioning by corporate clients and fund managers in March.

‘There was a lot of switching especially to the short end of the curve where the returns have been relatively higher,’ said Eric Musau, director of research at Standard Investment Bank.

Stockbrokers are looking at a bumper year, with the increase in trading signalling higher commission fees for them. The bonds turnover for the period was Sh2.16 trillion – double the value traded – given that each trade has a buy and sell.

Capital A Investment Bank retained its position as the largest stockbroker in the bonds market with a market share of 18.4 percent, followed by Standard Investment Bank which had 12.8 percent share of the first quarter turnover. The top five brokers in the bond market control over 50 percent of the market, riding on corporate and fund manager business.

The others in the top five intermediaries are SBG Securities with a 7.63 percent, Faida Investment Bank (7.22 percent) and NCBA Investment Bank with a 5.83 percent market share. The turnover of the five brokers was Sh1.12 trillion while the other 22 intermediaries handled Sh1.04 trillion.

The stockbrokers’ market share signals the financial performance of the intermediaries, with trading commissions being a major revenue line.

Stockbrokers normally charge a commission of 0.03 percent per bond trade. Other top players in the bond market, as at the first quarter data, were Kestrel Capital with a 5.56 percent market share, Sterling Investment Bank (5.16 percent) and Genghis Capital (5.08 percent).

A legal battle over a Sh54 million loan, which triggered the forced sale of a prime 25-acre property worth Sh295 million in Karen, Nairobi, has been escalated to the Supreme Court, setting the stage for a landmark ruling on the powers banks hold in the sale of assets presented as collateral.

Nyanja Holdings, a company linked to former Limuru MP George Nyanja, is challenging a Court of Appeal decision that upheld the sale of its land despite findings that the loan had been overpaid and the auction process was flawed.

The company seeks to overturn the sale, arguing that illegal or irregular transactions should not confer valid ownership, leaving borrowers with only damages as recourse.

The dispute stems from a loan agreement with City Finance (now Kingdom Bank) in the early 1990s.

Borrowers claim they repaid over Sh54 million-far exceeding the initial Sh8 million overdraft limit-yet still lost multiple properties, including the Karen estate, through the bank’s statutory power of sale.

The land was later sold privately to Redmars Holdings for Sh60 million, a fraction of its alleged market value of Sh295 million, while litigation over the loan was still pending.

In January 2026, the Court of Appeal overturned a High Court ruling that had nullified the sale and restored the property to Nyanja Holdings.

The appellate court held that completed sales under a bank’s statutory power are irreversible unless buyer fraud is proven, restricting borrowers to compensation claims.

Dissatisfied, the borrowers have filed an urgent application to appeal to the Supreme Court, warning that Redmars could sell or subdivide the land before the case is heard.

Their lawyer, Dudley Ochiel, contends that the ruling exposes borrowers to unfair losses even when lenders act unlawfully.

‘The court upheld the sale despite the loan being overpaid and the statutory power of sale being illegally exercised,’ Mr Ochiel stated.

‘This creates uncertainty in mortgage law, affecting lenders, borrowers, and property buyers alike.’

The case hinges on whether courts can invalidate bank sales tainted by illegality or procedural breaches, a question that has divided judicial opinion.

Nyanja Holdings argues that conflicting appellate rulings have muddled mortgage enforcement, necessitating the Supreme Court’s intervention.

However, Kingdom Bank opposes the appeal, insisting the law is settled. Jackson Kimathi, the bank’s legal head, maintains that borrowers cannot reclaim sold properties and must instead seek damages.

‘The applicants have not shown exceptional circumstances to justify reopening this matter,’ he argued in court filings.

At the heart of the dispute is a long-running legal question that has split courts, especially on whether an illegal or irregular sale of charged property can still confer a valid title to a buyer, leaving the borrower with damages as the only remedy.

The applicants argue that conflicting decisions by the Court of Appeal have created uncertainty in mortgage law, affecting lenders, borrowers, and property buyers.

They want the Supreme Court to determine whether courts can overturn such sales, especially where there are allegations of illegality, undervaluation, or procedural breaches.

‘Due to the class interest in this matter, the prevalence of land securitization, and the jurisprudential split at the Court of Appeal, the issues in this appeal are prone to recur and will continually engage the workings of Kenyan courts,’ says Mr Ochiel.

The Supreme Court’s decision, expected after hearings on April 21, 2026, could clarify the extent of buyer protections in bank sales and could reshape Kenya’s property lending landscape.

The ruling could also influence future disputes over alleged undervaluation and procedural breaches in secured transactions, setting a precedent for balancing borrower rights against the finality of commercial deals.

Kenya’s economic narrative today is one of energy and ambition. New investments are announced, investor engagement is active, and business registrations remain strong, with over 130,000 new entities entering the system each year.

The government deserves recognition for its efforts to position the country as a preferred investment destination across various sectors of the economy. This is an important and positive foundation.

However, beneath this momentum lies a quieter trend that deserves equal attention. Businesses face increasing pressure. While new enterprises continue to enter the market, many operational companies, especially in manufacturing and the formal SME sector, are under strain. The challenge is not one single factor, but the combined effect of multiple cost layers.

These include high financing costs, elevated energy tariffs, rising water and utility charges, increasing logistics costs, port congestion and inefficiencies, expanding regulatory requirements, increased instability and unpredictability of the operating environment and rising taxes and levies at both national and county levels.

At the same time, the evolving geopolitical tensions affecting key trade routes have increased freight costs, disrupted supply chains, and added to the uncertainty businesses must already navigate.

Recent trends also show that business closures are rising, even as new registrations remain high. While Kenya continues to see net growth in the number of registered businesses, this does not fully reflect the quality or sustainability of that growth.

This raises an important question: are we placing enough focus on the survival and competitiveness of existing businesses, or are we overly focused on new entries? Because in reality, the two are not equal.

An established manufacturing business supports hundreds, sometimes thousands, of jobs. It builds export relationships and contributes significantly to the tax base. When such a business weakens or exits, the impact is immediate.

By contrast, many new business registrations represent small or early-stage enterprises, often with limited employment and uncertain survival. Over time, this imbalance can quietly weaken the industrial base.

Manufacturing makes this challenge very clear. It is a globally competitive sector. Kenya competes with countries where the cost of finance is lower, energy is cheaper, logistics are more efficient, and policy environments are more stable. Even moderate cost differences, when combined, can significantly reduce competitiveness.

The effects are gradual but real. Businesses delay expansion, reduce investment, or shift focus. Over time, this can lead to slower export growth, fewer jobs, and reduced industrial depth.

At the same time, Kenya’s move toward stronger environmental and regulatory standards reflects a forward-looking commitment. This is necessary and aligned with global expectations. However, the pace and cost of compliance must be balanced to ensure that businesses remain viable as they adapt.

The issue, therefore, is not intent, but alignment. As Kenya’s economic policy clearly prioritises export-led industrialisation, there is a strong case for viewing export manufacturing through a global competitiveness lens. Businesses operating in the export processing zones (EPZs) and special economic zones (SEZs) compete internationally, not locally. They require a stable and predictable environment aligned with global benchmarks.

A ring-fenced policy approach, with consistency in taxation, utilities, and regulatory costs, would enable them to compete on a level playing field. This is not about special treatment. It is about ensuring that Kenya remains competitive in global value chains. Such an approach would strengthen exports, increase foreign exchange earnings, support large-scale employment, and deepen industrial capability.

Looking ahead, a few strategic shifts can further strengthen Kenya’s trajectory.

First, policy decisions must be evaluated through a consolidated cost-of-doing business lens. At present, multiple agencies, departments, and levels of government act in silos, each adding costs and compliance requirements. Individually justified, these measures together can steadily erode competitiveness.

Second, regular benchmarking with peer economies is essential to maintain competitiveness in globally traded sectors such as manufacturing. Third, stability and predictability in policy are critical to support long-term investment and expansion. Finally, stronger alignment between national and county frameworks will help reduce duplication and improve efficiency.

Above all, the focus must shift from how many businesses are created to how many competitive businesses endure, scale and thrive.

Kenya has the fundamentals to become a leading industrial and investment hub in the region.

The next phase of growth will depend not only on attracting new businesses, but on enabling existing ones to survive, compete, and grow. Because sustainable economic progress is built not just on entry, but on resilience.

In elite sport, teams often line up with similar talent, similar training, and similar ambition. Yet some consistently rise above the rest. Consider the era when Sir Alex Ferguson managed Manchester United.

Over more than two decades, Ferguson repeatedly rebuilt winning teams. Players changed, tactics evolved, and competitors strengthened. But the culture of performance endured.

His leadership combined clarity of standards, relentless discipline, and the ability to inspire belief. The result was sustained excellence.

Organisations operate in much the same way. Teams may have comparable resources, capable professionals, and clear strategies. What ultimately determines whether performance flourishes or stalls is leadership style. It is the invisible force that shapes culture, influences behaviour, and determines whether people simply work or truly excel.

Leadership is never one-dimensional. Autocratic, democratic, transformational, transactional, and laissez-faire approaches all exist along a spectrum, and each leaves a distinct imprint on an organisation’s culture, innovation capacity, and long-term results.

Research consistently shows that leadership quality has a direct impact on employee engagement and productivity. When leadership is effective, people bring energy and creativity to their roles.

When it is not, motivation erodes and performance inevitably declines.

Corporate history offers powerful examples. Under Steve Jobs, Apple Inc. demonstrated the force of transformational leadership. Jobs challenged teams to pursue bold ideas and demanded extraordinary standards. The outcome was a culture that prized invention and design excellence. The iPhone, for example, transformed industries and revolutionised global communication.

The opposite lesson can be found in the collapse of Enron. Leadership there combined autocratic control with a corrosive ethical culture. Short-term gains were rewarded, dissent was discouraged, and accountability was absent.

The eventual downfall wiped out billions in value and destroyed thousands of livelihoods. It remains one of the clearest reminders that leadership style is not merely a management preference; it is a determinant of institutional integrity and sustainability.

For business leaders, the challenge is not to adopt a single style, but to lead intentionally and adaptively. They must exercise authority carefully yet communicate with clarity. Decisive leadership is essential in moments of crisis, yet long-term performance grows from trust rather than fear. They must also pair inspiration with discipline.

A transformational vision inspires individuals; however, achieving results necessitates a structured approach that includes well-defined objectives, regular feedback, and equitable recognition systems.

Great organisations ensure continuous and inclusive dialogues that surface better ideas and builds ownership.

The leaders, however, must have the courage to provide the final direction and be accountable for the decisions. True empowerment means providing both freedom and unmistakable expectations.

As organisations become more global and diverse, three leadership practices increasingly distinguish high-performing teams from the rest.

Purpose with measurable outcomes. People engage deeply when they see how their work contributes to something larger than themselves.

Psychological safety alongside high standards. The best ideas often begin as uncertain ones. Leaders must create space for experimentation while insisting on disciplined execution.

Consistent rhythms of coaching and feedback. Sustainable performance rarely comes from occasional bursts of effort; it grows through steady guidance, learning, and improvement.

For boards and chief executives, the implication is clear. Leadership development must move beyond technical competence toward adaptive leadership. We must develop leaders who can inspire vision, enforce accountability, and uphold ethical standards simultaneously.

Emotional intelligence plays a decisive role. Leaders who understand people, manage themselves well, and respond with empathy unlock deeper commitment and stronger collaboration.

Ultimately, leadership style is not a soft variable. It is a strategic choice. It determines what an organization rewards, what it tolerates, and what it becomes. When leadership shifts from rigid control to empowered accountability, organizations unlock something powerful: People who think boldly, act responsibly, and perform consistently.

And when that happens, success is no longer accidental, it becomes cultural. That is how we create thriving and High-performing organisations.

Loan write-offs by Sidian Bank hit Sh1.58 billion in the year ended December 2025, a significant increase compared to the previous year, after years of pursuing recovery and settlement by customers.

The write-off marked a sharp jump from just Sh22.33 million in 2024, ranking Sidian among the largest single-year loan losses in the industry. This came in the year when Sidian’s net profit rose six times to Sh1.72 billion from Sh287.35 million in 2024.

A loan write-off is the process by which a lender formally acknowledges that an advance is unlikely to be repaid and removes it from its balance sheet as an asset, even though borrowers remain liable to pay.

Sidian says in the latest disclosures that it has a policy to write off loans when it has exhausted all recovery efforts, even when they are still ‘subject to enforcement activity.’

‘The group writes off financial assets, in whole or in part, when it has exhausted all practical recovery efforts and has concluded there is no reasonable expectation of recovery,’ said the mid-tier bank.

The lender’s non-performing loans (NPL) ratio remained high at 26 percent in 2025 against the industry’s 15.4 percent. The latest NPL ratio moderated from 27.2 percent in the previous year but remained more than twice the 11.7 percent in 2022.

Sidian said it deems loans as unrecoverable when there is no reasonable expectation of repayment, including cases where enforcement efforts have ceased or where recovery through collateral, such as foreclosure, is unlikely to yield full value.

‘The group may write off financial assets that are still subject to enforcement activity. The group still seeks to recover amounts it is legally owed in full, but which have been partially written off due to no reasonable expectation of recovering in full,’ said the lender. The write-off came in the year Sidian increased its provisioning for NPLs, which rose 87.6 percent to Sh2.44 billion from Sh1.3 billion.

The higher provisioning bucked the trend in the banking sector, where many players were reducing the provisions.

Sidian’s gross loans grew from Sh28.1 billion in 2024 to Sh31.54 billion last year, with most of it being short-term.

The lender’s loans maturing within a year nearly doubled to Sh15.5 billion from Sh8.1 billion as those with a maturity of between one and five years fell to Sh12.98 billion from Sh18.6 billion.

Those with maturity of over five years rose to Sh3.05 billion from Sh1.33 billion. The write-offs came in the year when the aggregate amount of NPLs edged up to Sh8.23 billion from Sh7.71 billion, while provisions for loan losses hit Sh3.59 billion from Sh3.05 billion.

Sidian said it closed the year with net non-performing loans of Sh4.64 billion compared with Sh4.65 billion in the previous year, against which it held various assets as collateral, including mortgages, motor vehicles, land and building, chattels, and share certificates.

Sidian says it sometimes modifies the terms of loans provided to customers due to commercial renegotiations, or for distressed loans, with a view to maximising recovery. This may involve longer repayment tenors, payment breaks, or partial write-downs.

However, the lender explains that it opted for restructuring because of indications of continued repayments.

‘These policies are kept under continuous review. Restructuring is most commonly applied to term loans,’ said the lender.

Sidian says its weighted average interest rate on loans and advances was 17.2 percent last year from 18.9 percent in 2024, with the easing reflecting the drop in the Central Bank Rate.

The Competition Authority of Kenya (CAK) helped suppliers, mostly small businesses, to recover Sh76.29 million in the year ended June 2025, even as cases of exploitation by dominant buyers dropped.

The competition watchdog said the amount was recovered in the period when it received 59 cases related to abuse of buyer power. In the previous year, CAK had helped small firms recover Sh89.52 million out of the 82 cases it received.

Abuse of buyer power occurs when a large or influential purchaser uses its superior bargaining position to obtain supply terms that are more favourable than would arise under normal commercial arrangements, or that are disproportionate, unfair, and detrimental to a supplier. Such include delayed payments and forced cost-sharing.

The watchdog has been stepping up enforcement against abuse of buyer power.

The Competition Act allows CAK to pursue administrative remedies, including penalties up to 10 percent of a company’s annual turnover, fines of up to Sh10 million, or up to five years’ imprisonment.

CAK says it investigated 59 cases of abuse of buyer power, with 40 being concluded as of the end of the reporting period. This led to the release of the Sh76.29 million in delayed payments owed to suppliers. The insurance sector was in the spotlight, accounting for 47.7 percent of all cases investigated.

‘This can be attributed in part to increased sensitization efforts to the insurance sector players,’ said CAK in the latest report.

The Insurance Act requires insurers to settle claims within 90 days of receiving all necessary documentation from policyholders.

The retail sector recorded 11.43 percent of the cases, followed by the construction and telecommunication sectors (each at 10 percent), the agriculture sector (7.74 percent and intellectual property 5.71 percent. Other sectors included manufacturing, hospitality, cosmetics, healthcare, translation services, and electronics, each accounting for 1.43 percent.

Over the same period, there was an uptick in consumer complaints against various companies, with the reported cases jumping 37.1 percent to 915 from 658.

‘This surge is attributable to sustained efforts to raise awareness among consumers about their rights and obligations, and the authority’s robust complaints-handling mechanisms,’ said CAK.

The watchdog said the interventions in customers’ complaints resulted in savings of Sh21.4 million. The redress was in the form of refunds, repairs, or replacements arising from goods or services purchased.

CAK has continued to put the spotlight on firms abusing their dominant positions. In December 2025, the watchdog penalised Directline Assurance Company Sh85.02 million for abusing its superior bargaining position over two Nairobi-based automobile repair centres.

Directline was also ordered to settle outstanding payments totalling Sh6.06 million to the two companies- small enterprises that provide services such as panel beating, spray-painting, and mechanical repairs on motor vehicles. The firm was ordered to revise its contracts to include interest on late payments.

Delays in development of key transport links under the Lamu Port-South Sudan-Ethiopia Transport (Lapsset ) corridor have left completed facilities at the Lamu Port underutilised, denying the public the expected economic benefits from one of Kenya’s flagship infrastructure projects.

Latest audit disclosures by Auditor General Nancy Gathungu show that while the first three berths at the port are complete, cargo evacuation remains constrained by stalled or unstarted road projects linking the corridor to the hinterland.

The report details that critical routes, including Lamu-Ijara-Garissa-Isiolo and Isiolo-Maralal-Lokori-Lokichar, remain incomplete, effectively cutting off the port from the broader transport network it was designed to anchor.

This, the findings show, has slowed cargo movement and weakened the commercial viability of the port, raising concerns over returns on billions of shillings already sunk into the project.

‘As previously reported, the first three berths at the port of Lamu have been completed. However, cargo evacuation through the project’s intended route is facing serious challenges as construction of key infrastructure has not been completed, while others are yet to start,’ the Auditor General said.

‘ln the circumstances, delayed implementation of Lapsset Corridor Projects denied the public benefits that could have accrued from completed projects.’

Conceived as a transformative regional corridor linking Kenya to Ethiopia and to South Sudan, the Lapsset programme was expected to open up northern Kenya and ease pressure on the Port of Mombasa.

The project’s broader components – including highways, pipelines, railways, and resort cities – were designed to work as an integrated system, amplifying trade and investment across multiple sectors.

There, however, has been a lack of synchronisation between port development and inland connectivity, creating operational bottlenecks, that limit cargo throughput.

The stalled road network has blunted Lamu Port’s ability to compete with established routes, particularly the Northern Corridor anchored on Mombasa, which remains fully integrated.

The current audit adds to a growing list of concerns around the pace of implementation of large-scale infrastructure projects, many of which have faced delays linked to funding constraints and coordination challenges.

The ongoing debate between the International Monetary Fund (IMF) and the Kenyan government over the true size and definition of public debt is no longer a technical accounting matter. It is a fundamental question about how sovereign debt itself should be understood, measured, and managed in developing economies.

At the centre of this debate is a recent IMF position that Kenya’s public debt should be recalculated to include securitised borrowing linked to major infrastructure projects such as the standard gauge railway (SGR), as well as pending bills and liabilities held outside the traditional government balance sheet.

If adopted, this approach could push Kenya’s total public debt beyond Sh13 trillion, up from the currently reported Sh12.3 trillion, significantly altering the country’s fiscal outlook and risk profile.

Traditionally, Kenya has defined its public debt within a relatively narrow perimeter comprising external loans, bilateral and multilateral obligations, and domestic instruments such as Treasury bonds and bills.

This framework reflects a conventional, cash-based view of sovereign obligations, where only explicit, legally binding borrowings are recognised as debt.

However, the IMF’s evolving stance reflects a broader, more comprehensive interpretation. It argues that financing arrangements tied to future revenue streams, such as those used in the SGR through securitisation structures are in substance liabilities of the State, even if they are legally structured off the government’s balance sheet.

In addition, the IMF is calling for the inclusion of pending bills owed to suppliers and contractors, as well as non-guaranteed borrowings by State corporations, on the basis that these obligations ultimately represent claims on public resources and therefore affect fiscal sustainability and investor confidence.

This position is rooted in the IMF’s overarching mandate to safeguard macroeconomic stability. From its perspective, the key issue is not merely the legal classification of debt, but the economic reality of obligations that the government is likely to honour, either directly or indirectly.

Securitised debt, for instance, may be structured through Special Purpose Vehicles (SPVs) and backed by ring-fenced revenue streams such as railway income or fuel levies, but if those revenues under-perform or if the strategic importance of the asset necessitates State intervention, the government may still bear the ultimate burden.

Similarly, pending bills, often accumulated through delayed payments to suppliers, represent a form of implicit borrowing, effectively shifting financing costs onto the private sector while masking the true fiscal deficit.

The Kenyan government, however, has strongly pushed back against this expanded definition.

Its argument is grounded in legal form and fiscal sovereignty. Once revenues are transferred to SPVs and used to service securitised obligations, associated liabilities are no longer considered part of the government’s debt stock. From this standpoint, including such obligations would amount to double counting or misrepresenting the fiscal position.

The Treasury also emphasises that not all state corporation debt is guaranteed by the government, and therefore should not automatically be classified as sovereign debt.

Broadly, the government’s position reflects a development-oriented philosophy that innovative financing mechanisms, including securitisation, are essential tools for funding large-scale infrastructure without overburdening the sovereign balance sheet.

What emerges from this disagreement is a deeper conceptual divide over the definition of sovereign debt itself. The IMF advances a substance-over-form approach, in which sovereign debt encompasses all liabilities, explicit and implicit, that could reasonably fall on the State and affect its ability to maintain macroeconomic stability.

Ultimately, the issue is not whether Kenya’s debt is Sh12 trillion or Sh13 trillion; it is whether the country has a clear, transparent, and economically meaningful understanding of its obligations. The real constraint facing Kenya today is not merely the size of its debt stock, but the growing burden of debt service relative to government revenues.

The path forward lies in bridging these perspectives by adopting a comprehensive definition of sovereign debt that captures the full spectrum of fiscal risks, while also ensuring that debt is used productively to generate the growth needed to sustain it.

Only then can Kenya move beyond the debate over numbers and toward a more resilient and credible fiscal framework.

This dynamic underscores the importance of both accurate measurement and effective management. In this context, the IMF’s push for recalculation should not be viewed solely as an external imposition, but as part of a broader effort to align fiscal reporting with economic reality.

At the same time, the government’s emphasis on growth and innovative financing highlights the need for a balanced approach that supports development while safeguarding sustainability.

This includes not only direct borrowings, but also contingent liabilities, off-balance-sheet financing, and arrears such as pending bills.

The Government of Kenya, by contrast, adopts a more formalistic and growth-oriented definition, limiting sovereign debt to legally recognised obligations while viewing other liabilities as separate from the core fiscal framework, particularly where they are linked to commercially viable projects or ring-fenced revenue streams.

A more complete and analytically sound definition of sovereign debt, especially in the context of emerging economies like Kenya, must reconcile these two perspectives.

Sovereign debt should be understood as the total stock of financial obligations incurred or effectively borne by the state, whether directly or indirectly, whose sustainability depends not only on their legal classification but also on the government’s capacity to service them through revenue generation, economic growth, and prudent fiscal management, without triggering macroeconomic instability.

This definition acknowledges that while legal structures such as SPVs and securitisation can redistribute and manage risk, they do not eliminate it, particularly where the underlying assets are strategic or politically sensitive.

The implications of this debate are profound. If Kenya adopts the IMF’s broader framework, its reported debt levels will rise significantly, potentially affecting credit ratings, borrowing costs, and investor perception.

More importantly, it would force a more transparent and holistic assessment of fiscal risks, including those that have traditionally been deferred.

On the other hand, maintaining the current approach allows the government greater flexibility in financing development projects, but at the cost of potentially understating fiscal vulnerabilities and accumulating hidden liabilities that could crystallise in the future.

Investors rejected a government offer to switch from costly maturing bond to a new cheaper security, forcing the State to pay them Sh18.2 billion in August.

The Central Bank of Kenya (CBK) offered holders of a 10-year bond, which is maturing in August, a chance to swap Sh20 billion with 15-year paper that will mature in 2033 to ease financing pressure on the Treasury.

Investors offered to switch Sh2.56 billion in the sale, with the CBK taking up Sh1.75 billion. This means that the Treasury will have to pay the balance of Sh18.2 billion in August.

Investors offered to switch Sh2.56 billion in the sale, with the CBK taking up Sh1.75 billion.

The 10-year paper has been paying holders 15.04 percent in annual interest, while the 15-year paper bond, which has been in the market since May 2018, is offering investors 12.65 percent.

Before the start if the Iran war at the end of February, interest rates were expected to keep declining in line with the sustained monetary easing actions of the CBK.

The apex bank had cut its policy rate by a cumulative 4.25 percentage points to 8.75 percent in 10 straight monetary policy committee (MPC) meetings between August 2024 and February 2026.

The CBK halted the easing in last week’s MPC meeting with a hold at 8.75 percent, pointing to concerns about emerging inflationary pressure from higher energy prices.

According to analysts, the market has taken cue and is now adjusting its rate expectations upwards. In such instances, investors would prefer to hold on to a liquid position, in order to be able to take advantage of higher rates in case inflation goes up in the near term.

‘While the MPC forecasts inflation to remain contained with the target range in the near term, the overall impact of higher inflation expectations on the yield curve is somewhat emerging. This is reflected in the mid-to-long segments of the government securities yield curve, where an average increase of 20 basis points has been observed,’ said analysts at NCBA Investment Bank in a fixed income note.

‘Investors seem to be increasing their required rates of return on investments as a safe-guard against anticipated inflationary pressures.’

A switch bond issuance involves the direct conversion of maturing Treasury bills and bonds into a longer term security, cushioning the exchequer from a liquidity crisis in the short term.

Domestic debt maturities are usually funded by rolling over the debt via new bond issuances, and rarely through repayments from tax collections since the government is already running a budget deficit.

Refinancing the debt through ordinary bond sales, however, means that rollovers can affect the government’s ability to make new borrowing for budgetary purposes, especially when these bonds are undersubscribed.

Swapping a bond, therefore, helps avoid competition for funds between maturities and new borrowing.

For the CBK, the timing of the war is now a threat to its efforts to extend the maturity profile of government debt at a lower cost through such switch bonds.

The April swap was the third one in 2026, but was the only one to be undersubscribed.

The first of the swaps was done in January 2026, and also involved the 10-year, 2016 paper that was being switched in the April sale. In the sale, investors agreed to roll over Sh25.17 billion worth of notes into a 15-year paper that was floated in 2022, at an annual interest rate of 13.94 percent.

The second switch sale targeting Sh15 billion was carried out last month, where holders of a five-year bond of a coupon of 11.37 percent that is due to mature in November this year transferred Sh18.4 billion into a 15-year bond that was issued in 2019 at 12.34 percent.