Kenya’s National Treasury has announced plans to borrow 355 billion Kenyan shillings (approximately $2.75 billion) from external sources to finance part of the 2024/2025 fiscal deficit. According to the Treasury’s Annual Borrowing Plan, the total fiscal shortfall for the upcoming financial year stands at $5.96 billion, equivalent to 5.6% of the nation’s gross domestic product (GDP). The shortfall will also be addressed through domestic borrowing of $3.21 billion, with both avenues crucial to mitigating the country’s growing financial gap.
John Mbadi, Kenya’s Cabinet Secretary for the National Treasury and Economic Planning, revealed that the government is undertaking fiscal consolidation aimed at reducing the deficit from 5.6% of GDP to 4.3% by the end of the next financial year. This effort forms part of a broader strategy to curb Kenya’s increasing debt vulnerabilities and enhance the sustainability of its debt-to-GDP ratio in the medium term.
The country’s total public debt currently stands at $81.8 billion, with external borrowing accounting for 48.8% of this figure. To navigate mounting debt pressures, the Kenyan government plans to engage in a series of refinancing measures, including debt swaps, buybacks, and restructuring agreements. The Treasury highlighted past success in debt swap deals with Italy and Germany, which saw €44 million ($48 million) and €60 million converted into funding for development projects, respectively.
The government also successfully executed a Eurobond issuance and buyback in February to refinance its $1.5 billion Eurobond, further showcasing its determination to manage external liabilities. These initiatives align with Kenya’s ongoing efforts to create fiscal space and reduce dependency on high-cost loans.
Analysts view these borrowing strategies as part of a delicate balancing act for Kenya, as it strives to meet domestic spending obligations while curbing the risk of ballooning debt. However, the long-term success of these plans will depend on both prudent fiscal management and broader economic growth, as debt servicing costs continue to mount.
