Domestic loans now dominate Kenya's Sh12 trillion public debt
Business
By
Macharia Kamau
| Nov 04, 2025
Kenya’s public debt rose to Sh12.05 trillion by the end of September 2025, heightening concerns over the country’s debt sustainability and its growing reliance on domestic borrowing.
Fresh data from the National Treasury’s Debt Management Office shows that total public and publicly guaranteed debt stood at 67.3 per cent of GDP, equivalent to $93.27 billion. Of this, domestic debt accounted for 55.3 per cent (Sh6.66 trillion) while external debt made up 44.7 per cent (Sh5.39 trillion).
“The total nominal public and publicly guaranteed debt stock at the end of September 2025 was Sh12,054 billion, equivalent to $93.27 billion,” Treasury stated in its September Debt Bulletin.
The data reveals a shift in Kenya’s debt composition, with domestic borrowing rising sharply even as external debt declined slightly. External debt dropped by Sh9.75 billion, from Sh5.403 trillion in August to Sh5.393 trillion in September, largely due to a reduction in commercial and guaranteed loans.
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At the same time, domestic debt increased by Sh95.96 billion, up from Sh6.564 trillion in August to Sh6.660 billion at end September 2025, as the government turned to local markets amid tight global credit conditions and high external borrowing costs.
This trend marks a major reversal from previous years, when external loans formed the bulk of Kenya’s debt portfolio. In September 2023, domestic debt accounted for just 46.4 per cent of total debt, compared to 53.6 per cent for external debt. In its Medium Term Debt Strategy, Treasury said it plans to increase borrowing from domestic sources to 75 per cent while reducing reliance on foreign lenders to 25 per cent.
As of December 2024, public debt stood at Sh10.93 trillion, split almost evenly between local and external sources, with Sh5.868 trillion being from domestic sources and Sh5.057 trillion from external lenders.
Despite concerns on the impact that this might have on lending of the private sector as banks lend to the government, Treasury officials have in the past explained that external sources have been shrinking, partly on account of policy pronouncements by major economies. In instances where credit by international lenders was available, it was at a high cost.
Public debt hitting Sh12 trillion might revive discussions on the sustainability of Kenya’s debt, even as many feel that the country is already past this point.
A recent report by local civil society organisations showed that Kenya is now spending more money to service its public than basic services combined.