The government spent Sh507.98 billion to pay public debt over three months to September, marking the first time the half-a-trillion shillings mark has been crossed during similar periods before.
The debt payments between July and September 2025 marked a Sh182.5 billion increase compared to payments of Sh325.52 billion during a similar period last year, underlining the burden for Treasury as it retired some external and domestic loans, new details by the Controller of Budget (CoB) show.
This is the first time Kenya has spent more than half a trillion shillings on debt payments over similar periods, even as the public debt stock continues rising.
“Total expenditure on public debt in the first three months of FY [fiscal year] 2025/2026 amounted to Sh507.98 billion, representing 27 percent of the revised estimates, compared to Sh325.52 billion (17 percent) recorded in a similar period of FY 2024/2025,” the Controller of Budget (CoB) says.
Heavy spending on public debts squeezes cash for investment in public projects. For instance, total development spending during the three months (Sh132.5 billion) was about a quarter of the debt service.
The total debt service during the quarter was also close to 17 times the amount spent on housing, and 29 times the Sh17.3 billion used in construction of roads, the two areas with the highest development spending.
In a report for the budget implementation during the quarter, CoB Margaret Nyakang’o notes that settlement of principal payments for both external and domestic debts was the main driver for the huge rise in debt service during the quarter.
The government retired debt valued at Sh251.8 billion during the quarter, which was more than twice the Sh95.5 billion debt retired during a similar quarter in 2024.
The overall debt service during the quarter is the highest amount the government has spent during a similar period, even as the public debt stock continues rising.
“External debt servicing amounted to Sh213.09 billion, comprising Sh141.1 billion on principal payments, Sh71.68 billion on interest payment, Sh255.37 million on commitment fees, and Sh50.28 million on other charges,” Dr Nyakang’o observes.
Commercial debt
Payments to commercial banks accounted for more than half of the Sh213.09 billion debt payments to external creditors, with interest and principal payments on commercial debt standing at Sh41.8 billion and Sh69.9 billion respectively during the quarter.
The Treasury also spent Sh77 billion on bilateral debt repayments, out of which Sh58.4 billion was on principal debt (41.3 percent of the external principal debts paid).
On the domestic front, the Treasury spent Sh294.9 billion on debt payments, though interests cost higher than principal settlements.
The Treasury spent Sh184.2 billion on interest payments and Sh110.7 billion on settlement of principal debts, the CoB reported.
The domestic debt service constituted treasury bills and bonds, overdrafts and commissions to the Central Bank.
The growth in public debt service during the three months came at a time when the public debt stock crossed Sh12 trillion, after growing by Sh240 billion since June.
The State closed September with a debt stock of Sh12.04 trillion, majorly consisting of domestic debt that accounted for 55 percent, the CoB says.
The report notes that while external debts have fallen after some principal instruments were retired, domestic debts continue rising pushing up the burden farther.
“The public debt stock increased by 2 percent from Sh11.8 trillion as of 30 June 2025 to Sh12.04 trillion as of 30th September 2025. External debt declined by 2 percent due to repayments, while domestic debt recorded 5 percent growth attributable to increased borrowing in the domestic market,” Dr Nyakang’o says.
The Treasury allocated Sh1.9 trillion for the public debt service during the current fiscal year, compared to the Sh1.74 trillion allocated in the fiscal year to June 2025.
Of the Sh1.9 trillion, about Sh1.1 trillion will be spent on interest payments while Sh803.7 billion will be spent on settlement of principal debt.
