Budget Controller Issues Warning about Escalating Sh12tr Debt Struggle
On August 23, 2025, international rating agencies S&P and Fitch Ratings made significant moves by upgrading Kenya's long-term sovereign credit rating. S&P raised Kenya's rating from 'B-' to 'B', while Fitch followed suit, lifting Kenya's rating from 'B-' to 'B'.
The upgrades came as a result of reduced near-term external liquidity risks, robust export earnings, strong diaspora remittances, and a successful Eurobond buy-back operation earlier this year. S&P highlighted improvements, noting that Kenya's current account deficit narrowed to 1.3% of GDP in 2024, from 2.6% in 2023.
The rating improvement is likely to reduce the premium investors demand to hold Kenyan risk, potentially making future Eurobond issuances and commercial loans less expensive. S&P pointed to Kenya's successful debt management, stating that the Eurobond issuance and buy-back operation in February 2025 helped lower Eurobond principal repayments.
However, the upgrades do not solve fundamental revenue weaknesses and high spending demands in Kenya. The shrinking fiscal space threatens the delivery of essential public services and development programs. Debt servicing consumed Sh1.59 trillion in the 2024-25 financial year alone, equivalent to 91% of the budget allocated for public debt.
Kenya's public debt has grown sharply under President William Ruto's administration, increasing from Sh8.7 trillion in June 2022 to approximately Sh11.73 trillion in June 2025. Domestic debt stands at Sh6.33 trillion, making up 54% of total debt, while external debt is Sh5.4 trillion, accounting for 46% of total debt.
Forex reserves reached a record-high $11.2 billion (Sh1.45 trillion) in July 2025, up from $6.6 billion (Sh858 billion) at year-end 2023. Despite these positive strides, the escalating debt service obligations are limiting cash flows and affecting the operations of business activities, especially Small and Medium Enterprises.
The National Treasury has been urged to adhere to prudent borrowing practices and accelerate reforms to boost revenue collection. The government's borrowing policy has been significantly deviated from, with domestic borrowing outpacing external loans. The Treasury, facing substantial debt servicing requirements, will undoubtedly see the upgrades as a significant confidence boost.
The upgrades by S&P and Fitch are a testament to Kenya's economic resilience and potential for growth. However, the challenges remain, and the Treasury must navigate them carefully to ensure sustainable economic growth and development.
Read also:
- Understanding Hemorrhagic Gastroenteritis: Key Facts
- Trump's Policies: Tariffs, AI, Surveillance, and Possible Martial Law
- Expanded Community Health Involvement by CK Birla Hospitals, Jaipur, Maintained Through Consistent Outreach Programs Across Rajasthan
- Abdominal Fat Accumulation: Causes and Strategies for Reduction
