Kenya spent more than Sh1.35 trillion on debt repayments during the first nine months of the 2025/26 financial year, highlighting the growing burden of public debt and the country’s exposure to exchange rate fluctuations, according to a new report by the Controller of Budget (CoB).
The National Government Budget Implementation Review Report shows that Sh763.21 billion was spent on servicing domestic debt, while Sh588.85 billion went towards external debt obligations in the period ending March 31, 2026.
The Controller of Budget warned that Kenya remains vulnerable to currency risks, noting that 52 per cent of the country’s external debt is denominated in US dollars. Any depreciation of the Kenyan shilling against major international currencies increases the cost of servicing foreign debt and adds pressure to the country’s fiscal position.
To manage rising debt obligations, the government has continued implementing liability management strategies, including the repurchase of international bonds aimed at reducing refinancing risks and improving the maturity profile of public debt.
The report further revealed that Kenya’s total public debt stock rose by 9 per cent during the review period, increasing from Sh11.8 trillion as of June 30, 2025, to Sh12.82 trillion by March 31, 2026.
According to the Controller of Budget, the debt level now stands at 69.9 per cent of Gross Domestic Product (GDP), exceeding Parliament’s recommended debt anchor of 55 per cent of GDP by 14.9 percentage points.
“The stock of public debt increased from Sh11.80 trillion as at June 30, 2025 to Sh12.82 trillion as at March 31, 2026, representing a growth of 9 per cent,” the report states.
Domestic debt accounted for the largest share of the increase, rising by 13 per cent from Sh6.22 trillion to Sh7.05 trillion, largely driven by increased issuance of Treasury bills and bonds.
External debt also grew by 4 per cent to Sh5.77 trillion, reflecting additional borrowing and the impact of exchange rate movements.
The report notes that debt repayments accounted for the largest share of expenditure under the Consolidated Fund Services during the nine-month period, underscoring the pressure debt servicing continues to place on public finances.
The Controller of Budget also raised concerns over increased reliance on Article 223 of the Constitution, which allows the national government to withdraw funds from the Consolidated Fund for urgent and unforeseen expenditures before obtaining parliamentary approval.
Expenditure under Article 223 surged to Sh276.99 billion by March 2026, nearly six times higher than the Sh48.88 billion recorded during the same period of the 2024/25 financial year.
“The continued increase in Article 223 expenditures raises concerns regarding adherence to budget credibility and the principle of prior parliamentary approval,” the report states.
The Controller of Budget cautioned that while Article 223 provides flexibility during emergencies, excessive reliance on the provision could weaken fiscal discipline and undermine the integrity of the budget process.
The report also highlighted ongoing implementation challenges affecting government operations, including delays associated with the rollout of the Electronic Government Procurement (e-GP) system and a growing stock of pending bills across public institutions.
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