How debt burden is denying the sick critical services

For every Sh100 collected from taxpayers, about Sh76 is used to service the interest on loans, leaving little for education, health and other essential services.

This heavy burden means that out of a typical monthly tax collection of Sh160 billion, Sh120 billion is immediately consumed by debt interest.  

The situation has experts warning that the country is taking on expensive new loans just to keep up with its existing payments, a cycle that threatens to divert funds from critical public needs.   

The latest Monthly Debt Bulletin from the National Treasury reveals that in August 2025 alone, Sh120 billion was spent on debt interest payments. This is about 76 per cent of all the taxes collected that month, which were Sh157 billion.

On average, Kenya collects about Sh160 billion in taxes every month with most of the money collected going to repay debt rather than fund important services.

Development consultant and economic analyst Ephraim Njega warns that if this trend continues, Kenya could pay over Sh1.2 trillion in debt interest by the end of this financial year. 

The latest report from the National Treasury shows that out of the Sh120 billion paid as interest, Sh28 billion went to loans secured outside Kenya while Sh92 billion was for loans borrowed within the country.

Domestic loans are mostly derived from Treasury bonds and bills. These come with high interest rates, making it expensive for the government to keep up with payments.

Despite these challenges, Kenya received a credit rating upgrade from respected credit rating agency Standard & Poor’s this August, which according to the Treasury bulletin was attributed to stable foreign exchange reserves, steady export income, and diaspora remittances by Kenyans abroad.

The National Treasury says Kenya’s total public debt stood at roughly Sh11.1 trillion as of June 2025, as the government has been heavily borrowing to fund infrastructure projects, social initiatives, and plug in shortfalls in the national budget. 

When it approved the budget for the 2025/26 financial year, Parliament raised concerns about Kenya’s debt, noting the high cost of debt servicing obligations are pointing to growing fiscal strain.

Over the next financial year, Kenya expects to spend Sh1.9 trillion in repayment of both domestic and foreign debts, of which Sh1.097 trillion will be on interest payments as another Sh803 billion will be on debt redemption.

“The committee expressed concerns over the rising expenditure for Consolidated Fund Service (CFS), highlighting the increasing fiscal strain posed by debt servicing obligations. With interest payments projected to surge 10.2 per cent to Sh1.1 trillion, the growing debt burden could constrain budget flexibility and limit resources for development priorities,” said National Assembly’s Budget and Appropriations Committee in its report on the budget in June this year. 

“Higher borrowing rates may further exacerbate fiscal pressures, potentially leading to increased reliance on revenue mobilisation or spending adjustments.”

Bernard Njiri, senior researcher at the Institute of Public Finance (IPF) said the government’s heavy spending on debt serving has resulted in paltry amounts being spent on essential services such as health, education and water and sanitation.

This has in turn resulted in Kenyans spending out of pocket when seeking healthcare and opting to send their children to private schools, even when they can barely afford it. 

“High debt service has been squeezing the government’s spending on basic services,” said Njiri at a forum on debt organised by the Kenya Human Rights Commission (KHRC).

“Every year, Kenya has the biggest budget in the region but the people say they are not feeling the impact of this budget.”

Because of limited allocation to the critical services, Njiri noted, the government ends up making demands on Kenyans to spend on these services even when they are offered at public funded institutions.

It is also because of this, he added, that institutions including schools and hospitals grapple with lack of supplies including essential medicines, reduced and delayed capitation to schools while strikes by doctors and teachers are endemic. 

“Kenyans take their children to private schools not out of choice but because there are no options. The same person is also asked to pay a bullet payment of Sh7,000 for SHA to access medical services,” he said.

According to Treasury data, Kenya’s debt-to-GDP ratio is at about 70 per cent which is above the safe limit of 60 per cent recommended by the International Monetary Fund (IMF).

“This means that out of every Sh100 only Sh30 is left for development, salaries and critical services,” Njiri said, explaining that critical services and development projects are what suffers the most. 

The external debt increased by Sh18 billion from July to August 2025, mostly due to new disbursements.

Key external creditors include bilateral lenders such as Germany, China, Japan, France, and multilateral lenders such as the World Bank and IMF, and commercial lenders. 

For August 2025, external repayments and interest totaled Sh48.4 billion, with Sh20.6 billion going towards principal repayments and Sh27.8 billion for interest payments.

Multilateral creditors form the largest share of external debt, followed by commercial and bilateral creditors.