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Kenya’s domestic debt expands by Sh1.7 trillion under President Ruto
National Treasury and Economic Planning Cabinet Secretary John Mbadi addressing journalists outside the National Treasury Building in Nairobi on February 13, 2025.
Kenya’s borrowings from the domestic market have grown by Sh1.7 trillion since President William Ruto took over the reins of power in September 2022, growing from Sh4.342 trillion as of September 16, 2022 to cross the Sh6 trillion mark for the first time ever by February 14 this year standing at Sh6.021 trillion.
Data from the Central Bank of Kenya (CBK) shows that the growth rate in the past two years translates to almost half of the Sh3.319 trillion fresh domestic borrowings witnessed during the 10-year reign of retired President Uhuru Kenyatta.
Figures show that the gross national domestic debt stood at Sh1.023 trillion on April 12, 2013, three days after Mr Kenyatta was sworn in for his first term, and had expanded to Sh4.342 trillion by the time his successor took over Kenya’s leadership in September 2022.
Within this year alone, the government’s domestic borrowings have expanded by Sh152.7 billion, coming at a time Treasury’s overdraft drawings from the CBK emergency kitty have hit a record high of Sh107.5 billion as of close of last week.
Banks have continued to hold the largest proportion of government’s domestic debt standing at 45.92 percent as at close of last week, followed by pension funds at 28.38 percent while retail investors, insurance firms and State parastatals hold 12.62 percent, 7.21 percent and 5.87 percent respectively.
Retail investors, classified as “others” in the government’s breakdown of its domestic lender groups, comprise individuals, saccos, religious and educational institutions, private firms and self-help groups.
The heightened borrowing from the domestic market also comes despite implementation of new aggressive taxation measures following the passing of the Finance Act, 2023.
The higher taxation measures were billed as cutting down the country’s fiscal deficit during President Ruto’s first full financial year in office.
In its Budget Policy Statement (BPS) for the upcoming financial year, the National Treasury has set its target for net domestic borrowing at Sh684.2 billion, which would be an increase of Sh271 billion from the current year’s target of Sh413.1 billion.
The domestic market will thus shoulder the bulk of financing the Sh831 billion budget deficit for the upcoming year, with external lenders expected to contribute net loans of Sh146.8 billion.
Analysts have warned that increased pressure on CBK to accept more funds from the domestic bonds and Treasury bills market could risk resulting in an upward pressure on yields, thus elevating interest rates and reversing gains that the apex bank has attained with regard to taming inflation.
