Compared to September 2024’s figure of KSh 10.8 trillion, the increase amounts to KSh 1.26 trillion, roughly $9.7 billion, in the space of a year.
The period from June to September alone saw a net increase of at least KSh 250 billion ($1.93 billion). This rise was almost entirely driven by a KSh 340 billion (approximately $2.63 billion) increase in domestic borrowing, while external debt declined by approximately KSh 80 billion ($620 million).
The shift reflects the government of President William Ruto moving away from “expensive” externally-sourced loans to more domestic financing.
The country began highlighting this move in fiscal year 2022/23 after a US$2 billion Eurobond maturity amid tightening global credit markets and a weakening shilling.
A key report from the Institute of Economic Affairs finds: “There is a false notion that local debt is cheaper. In fact, it is almost 3-4 times higher compared to multilateral and external commercial loans whose rates average between four and eight per cent on the higher side.”
While yields on Treasury bills and bonds have dropped from peaks of up to 19% last year to around 8–13% currently, they remain considerably higher than external borrowing rates.
Debt-service data for the 2024-25 financial year show domestic obligations totalling KSh 1.05 trillion ($8.1 billion). Of that, interest payments consumed KSh 632.3 billion (approximately $4.9 billion), while only KSh 360.1 billion (approximately $2.8 billion) was allocated towards reducing the principal.
Domestic securities remain heavily weighted, with 83% in Treasury bonds and 17% in Treasury bills. Commercial banks top the list of holders, followed by pension funds and insurers.
In the domestic short-term market, yields have sharply eased: the 91-day Treasury bill rate fell from 15.8% in September 2024 to 7.9% in September 2025, a welcome relief for the government’s funding cost.
Externally, Kenya has diversified currency exposure. Multilateral lenders now account for 56.7% of external debt (up from 54.9% a year earlier), while bilateral debt fell to 18.5% and commercial external debt to 23.4%.
The share of external debt denominated in US dollars dropped from 62.1 percent to 52%; the euro rose from 25.5% to 27.9%.
External debt service during the review period was KSh 97.4 billion (approximately $753 million), comprising KSh 74.9 billion (roughly $579 million) for principal repayment and KSh 22.6 billion (approximately $174 million) for interest payments.
On the other hand, domestic borrowing may trap governments in high-cost loops, crowding out essential social and development spending. African policymakers may, and should, ask: Is domestic debt actually cheaper, or merely more accessible?
As Kenya edges past the $90 billion debt mark, the affordability and sustainability of its financing strategy will remain under scrutiny, not just in Nairobi, but across capitals from Lagos to Addis Ababa, where similar funding dilemmas are unfolding.
