Failure by the government to disclose beneficiaries of its domestic market debt instruments is driving up costs and dimming the country’s economic growth prospects.

Despite projecting a gross domestic product (GDP) growth of 5.3 per cent and setting a 2025/26 revenue target of Sh2.8 trillion, experts warn that significant loopholes abound as a result of the failure to disclose the Beneficial Owners (BO) of debt instruments.

Beneficial owners are the real individuals who profit from or control assets registered under another name.  In Kenya, this crucial data remains shrouded in secrecy, allowing powerful individuals or entities to hide behind corporate veils.

According to Lyla Latiff, a research lead at Transparency International, this opacity enables procurement inflation, tax leakages, and manipulation of public debt—ultimately undermining service delivery and trust in public institutions.

“The knowledge of beneficial ownership is critical if we want to safeguard access to information and root out corruption,” she said. “There are countless ways people hide their identity, and that secrecy comes at a huge cost.”

The National Treasury, responsible for managing the country’s finances, remains tight-lipped about the real lenders behind government bonds and securities.

While the Central Bank of Kenya issues regular bulletins on debt levels, it does not disclose which banks or entities hold how much of the country’s debt. As a result, the public has no way of knowing whether politically connected individuals are profiting from these deals, raising concerns over potential conflicts of interest.

Without access to verified data on beneficial ownership, watchdogs and the public are left relying on whistle blowers who themselves are exposed to danger due to Kenya’s weak protection laws. And even when information leaks, its authenticity is hard to confirm in a system defined by opacity.

Unverified BO data is one of the most neglected aspects of governance, Latiff notes—and its effects are severe. When revenue is lost or diverted, debt rises.

Affordable credit

Kenya’s domestic debt now forms the bulk of its borrowing, pushing commercial banks to lend to government rather than private enterprises. This starves businesses of affordable credit, curbing investment and slowing the economy.

The revenue crunch is further exacerbated by a bloated budget structure. Of the projected Sh2.8 trillion in revenue this financial year, Sh2.14 trillion—more than 50 per cent—is earmarked for the Consolidated Fund Services (CFS), which includes public debt servicing, pensions, and salaries. Interest payments alone are set at Sh1.9 trillion, with Sh851 billion going to domestic lenders and Sh246 billion to external creditors. Another Sh800 billion will go toward repaying loan principal, leaving just a fraction of the budget for development.

As the Institute of Public Finance notes: “CFS is the first bite of the budget pie, and it’s a very large bite. What’s left is what counties, ministries, and citizens must share for public services and development.” The lack of transparency extends even to local governments. The Central Bank recently admitted that it lacks visibility into hundreds of county bank accounts held at commercial banks.

“There’s limited visibility by CBK banking teams unless flagged by oversight agencies,” CBK Governor Kamau Thugge told members of the Senate’s Standing Committee on Devolution and Intergovernmental Relations.

Kiambu Senator Karungo Wa Thang’wa had challenged the central bank to tell the committee how multiple accounts opened by the devolved units could be stopped.

“Because they are opening it for corruption purposes, stealing money then they close that account, open another account. How can we deal with that?”  he had posed. According to the senators, the counties claim to have special accounts for each service such as education, donor funding and health. 

Illicit financial flows

They cited that during a previous sitting, it was established that counties  opened accounts for all the hospitals from level 4 to level 1 with numbers running to about 300 accounts.  Transparency International is urging joint action across East Africa to track and recover proceeds from illicit financial flows.

“We have the East Africa Police Chief Cooperative Organisation,” said Latiff. “They should be leading joint operations on asset recovery. That’s their mandate.”