MPs raise alarm as Kenya’s debt servicing set to consume 91% of revenue
By Francis Muli, May 26, 2026Kenya’s growing debt burden has triggered fresh concerns in Parliament after the National Assembly’s Public Debt and Privatization Committee warned that rising debt servicing costs are steadily choking government spending and shrinking fiscal space.
The concerns emerged during a meeting between lawmakers, Central Bank of Kenya (CBK) Governor Dr. Kamau Thugge and Treasury Cabinet Secretary John Mbadi, where officials defended the government’s borrowing plans and debt management strategy for the 2026/27 financial year.
Treasury CS Mbadi disclosed that debt servicing obligations are projected to consume a staggering 91 per cent of ordinary government revenue in the next financial year, highlighting the scale of pressure facing the country’s finances.
According to the Treasury, Consolidated Fund Services requirements are expected to rise to KSh2.56 trillion, including KSh986.7 billion for domestic interest payments and KSh648.8 billion for domestic debt redemptions.
“We have been shifting resources from development in this country to servicing debt,” Mbadi told the committee on Tuesday, May 26, 2026.
The Treasury projects a fiscal deficit of Ksh1.111 trillion, equivalent to 5.3 per cent of GDP, which the government intends to finance mainly through domestic borrowing.
Lawmakers expressed concern that the heavy reliance on local borrowing could crowd out private sector lending and worsen pressure on the economy.
Committee Chairperson Shurie Abdi challenged Treasury and CBK officials to present what he termed a more honest assessment of Kenya’s fiscal position.
“We need to sit down and have a look at our facts, not trying to smoothen things and make things look good on paper. In reality, we all know it’s not the best thing. It will come to bite us at one time,” he said.
Vice Chairperson Irene Mrembo warned that supplementary budgets have historically pushed borrowing beyond initial targets, cautioning that the current domestic borrowing plan could nearly double to Ksh1.8 trillion.
Concerns were also raised over the government’s sharp shift from external borrowing to domestic debt financing.
Wajir East MP Aden Daudi questioned why the approved debt mix had shifted dramatically from 78 per cent external borrowing to nearly 90 per cent domestic financing.
CBK Governor Dr Kamau Thugge defended the strategy, arguing that liability management and refinancing efforts had helped Kenya avoid default risks and stabilise the shilling.
“By removing the risk of default or refinancing pressure, that has a positive impact on the exchange rate,” said Thugge, citing the management of the 2024 Eurobond repayment.
However, the governor revised Kenya’s economic growth forecast for the 2026/27 financial year from 5.5 per cent to 5 per cent, blaming the downgrade on global economic shocks linked to the ongoing conflict in the Middle East.
Despite the slower outlook, he said agriculture recovery and resilience in the construction sector continued to support the economy.
The governor further revealed that Kenya’s net debt-to-GDP ratio currently stands at about 64 per cent, well above the government’s target of 55 per cent.
Lawmakers also questioned the Government-to-Government (G2G) fuel import arrangement, with some MPs calling for a return to a free-market system.
Bomachoge Borabu MP Obadiah Barango criticised the fixed premium charged under the arrangement.
“Why can’t we drop this G2G so that we can let the free market resume?” he posed.
Mbadi attributed the country’s fiscal strain to years of expensive commercial borrowing and falling development expenditure, which he said has declined from 27 per cent of ordinary revenue in 2016 to just 12.4 per cent today.
The Treasury CS also reignited debate on the cost of governance, saying Kenya must begin a serious national conversation on public expenditure.
“We have a very expensive Constitution, we have 47 county governments and another government at the national level. It is high time that we discussed it,” Mbadi said.