Kenya’s debt service to the United States surged in the year to June 2025 to Sh18.4 billion, up from just Sh357 million in 2024, as the government accelerated repayments amid a policy shift by Washington to end direct lending to countries.
The 51.6 times jump pushed Kenya’s US debt repayments of both principal and interest to record levels, reflecting efforts to clear sovereign debt owed to one of its key bilateral lenders.
National Treasury Cabinet Secretary John Mbadi said the fast-tracked payments follow a change in the US’s bilateral lending approach from direct government loans to financing through its agencies.
“We are clearing the loans to the US government in about two or three years because the US government changed their model of financing and now they are financing activities and programmes using their agencies directly,” said Mbadi during a press briefing Tuesday.
“These are loans that were taken previously that are now retiring. Some of them are from many years ago, and we are now completing their repayment. That is why there is that elevation in debt repayment.”
As of June, Kenya’s debt to the US stood at $185.47 million (Sh23.9 billion), a steep drop from $310.13 million (Sh40 billion) a year earlier, Treasury data shows.
The reduction means Kenya now owes less to the US than to Belgium and Italy, which have historically lagged Washington in lending to African governments.
The shift to using agencies for project financing means Kenya may no longer receive broad budgetary support from the US, but rather sector-specific funding from institutions such as the US International Development Finance Corporation (DFC) and Prosper Africa.
The DFC has recently been strengthened under the Donald Trump administration, with its funding capacity raised from $60 billion (Sh7.8 trillion) to $250 billion (Sh32.3 trillion) and its mandate expanded to invest and lend even in high-income countries.
This new financing model mirrors that of the United Kingdom, which no longer lends directly to foreign governments but instead channels development funding through its agencies –the British International Investment (BII) and the UK Export Finance (UKEF).
Such models shield developed countries from the debt distress risks prevalent in many developing nations while mitigating political exposure in an increasingly fragmented global landscape.
Within the past year, Kenya also cleared its debt to Finland and sharply reduced its outstanding obligations to Denmark, Austria, and China.
However, as it races to retire US debt, Kenya has increased borrowing from Belgium, France, Germany, Italy, and Japan, all of which remain among its top ten bilateral lenders.
Even so, due to the sharp reduction in debt owed to the US and China, Kenya’s total bilateral debt fell by $377.16 million (Sh48.7 billion) to $8.6 billion (Sh1.1 trillion) as it turned to more concessional multilateral and commercial debt.
Overall, the country’s external debt stock rose by $2.5 billion (Sh323 billion) to $42.4 billion (Sh5.5 trillion), driven largely by higher commercial and multilateral borrowing from lenders such as the African Development Bank and the International Monetary Fund.
