CS for Finance John Mbandi
By Peter Mwibanda
Published on Intellectuals Post
NAIROBI, Kenya (IP)
Kenya’s debt management strategy is drawing sharp global scrutiny, with a major international ratings agency casting doubt on the government’s ability to rein in rising public debt under Treasury Cabinet Secretary Michael Mbadi.
Kenya’s public debt has now climbed past 11 trillion shillings amid sluggish revenue growth, mounting repayments and limited fiscal space.
Analysts warn the government’s repayment roadmap may be unsustainable and could push the country deeper into borrowing, edging closer to a debt trap.
Global agencies raise red flags
The unnamed global ratings agency, which monitors fiscal performance and sovereign risk in emerging markets, flagged Kenya’s debt trajectory as “concerning” and said the strategy lacks structural reforms to ensure long-term sustainability.
“The figures don’t lie. Without major adjustments in fiscal discipline, Kenya is on a path that raises questions about solvency and liquidity within the next five years,” the agency said in its latest outlook report.
Concerns have also been fueled by weaker GDP projections and a volatile shilling, which has shed nearly 20% of its value against the U.S. dollar in the past two years, driving up the cost of servicing external loans.
Controller of Budget joins the chorus
Domestically, Controller of Budget Margaret Nyakang’o has sounded similar alarms.
In a recent report, she cited opaque borrowing, weak expenditure controls and an over-reliance on debt to cover recurrent spending.
Debt repayments, her office noted are consuming more than 60% of ordinary revenue, squeezing out funding for health, education and infrastructure.
“Kenya cannot borrow its way out of a debt crisis,” the report warned.
Mbadi’s plan faces skepticism
Mbadi has laid out a strategy of gradual fiscal consolidation, stronger domestic revenue collection and expanded engagement with the IMF and World Bank. He has also proposed restructuring short-term debt by extending maturities.
But economists say the plan rests on unrealistic revenue growth assumptions and lacks bold reforms.
“Mbadi’s strategy assumes a level of revenue growth that just isn’t realistic in the current economic environment,” said Faith Wanjala, a Nairobi-based economist. “What’s missing is a decisive reform package—cutting waste, restructuring parastatals and tackling corruption in procurement.”
Economy under pressure
Inflation remains moderate at about 6.8%, but food and fuel costs continue to climb. Youth unemployment is high and credit to the private sector is shrinking as government borrowing crowds out local investors.
The World Bank projects 5% GDP growth in 2025 but warns the recovery is fragile and exposed to external shocks, including climate events and global instability.
Despite headwinds, remittances and a growing digital economy led by fintech and mobile money remain bright spots with potential to boost GDP in the coming decade.
Borrowing to repay borrowing
Kenya faces looming repayments on Eurobonds and Chinese infrastructure loans.
Analysts fear the government may issue new debt to cover old obligations, a cycle that deepens fiscal risk.
“We’ve entered a phase where borrowing is being used to service past borrowing,” said James Njoroge, an independent fiscal analyst. “It’s a vicious cycle that’s extremely difficult to break unless we make painful—but necessary—adjustments now.”
Lawmakers are already weighing a new Eurobond in 2026, a proposal critics see as a sign of desperation rather than strength.
Looking ahead
Pressure is mounting on Treasury and the wider government to take transparent, decisive steps to reverse the debt spiral.
Economists argue only stronger revenue collection, targeted austerity and sweeping structural reforms can restore investor confidence.
“The world is watching,” Wanjala said. “If Kenya fails to act, the debt crisis won’t just be an economic problem—it’ll become a political and social one too.”
