Kenya's Domestic Debt Rises by Over KSh 700 Billion in Under 12 Months

• Kenya’s gross domestic debt increased by KSh 777 billion in under a year, reaching KSh 6.187 trillion by May 16, 2025
• Treasury bonds remained the dominant debt instrument, totaling KSh 5.03 trillion and accounting for over 84% of total securities as of mid-May 2025
• Treasury bills rose to KSh 949.09 billion, while the Central Bank overdraft nearly doubled from KSh 61.02 billion to KSh 93.21 billion during the same period

Elijah Ntongai, a journalist at TUKO.co.ke, has over four years of financial, business, and technology research and reporting experience, providing insights into Kenyan and global trends.

Kenya’s domestic debt has surged by more than KSh 700 billion over the past year, reflecting the government’s growing reliance on internal borrowing to bridge budget deficits and fund operations.

Data from the Central Bank of Kenya shows the country’s gross domestic debt stood at KSh 6.187 trillion as of May 16, 2025, compared to KSh 5.410 trillion on June 28, 2024, a KSh 777 billion increase in under 12 months.

Kenyan government's domestic debt

Treasury bonds remained the preferred debt instrument, accounting for over 84% of total securities as of mid-May 2025, translating to KSh 5.03 trillion. Treasury bills totaled KSh 949.09 billion, accounting for 15.87% of total securities.

There was also a notable increase in the Central Bank overdraft, which nearly doubled from KSh 61.02 billion on June 28, 2024, to KSh 93.21 billion by May 16, 2025.

Other domestic debt, which includes advances from commercial banks and pre-1997 government overdrafts, rose modestly from KSh 106.25 billion to KSh 110.38 billion during the same period.

Composition of government domestic debt

As a percentage of total domestic debt, Treasury bonds slightly declined from 85.52% to 81.36% between June 2024 and May 2025, while the share of Treasury bills rose from 11.38% to 15.35%.

Banking institutions remained the largest holders of domestic debt, accounting for 45.07% in May 2025, although this marks a drop from 46.17% in June 2023.

Pension funds, which held 33.42% a year ago, reduced their stake to 28.76%. Interestingly, “Other Investors,” including custodial and nominee accounts, increased their share significantly, from 7.13% to 13.03% over the same period.

This shift may signal growing private sector interest in government securities amid tighter monetary policy and high interest rates.

Despite concerns about rising debt levels, the government has indicated that domestic borrowing remains crucial for managing liquidity and reducing foreign exchange risk.

Kenya shilling performance

In other news, the Kenyan shilling remained relatively stable against both the US dollar and major East African currencies during the week ending May 22, 2025, trading at KSh 129.23 per US dollar, slightly stronger than the previous week.

Its performance was supported by increased foreign exchange reserves, which rose from KSh 1.31 trillion to KSh 1.33 trillion.

Against regional currencies like the Tanzanian, Ugandan, Rwandan, and Burundian shillings, the Kenyan currency showed minimal fluctuations, signaling regional stability.

The Central Bank of Kenya reported that the reserves were adequate at 4.6 months of import cover.

Meanwhile, the money market remained liquid, with commercial banks holding KSh 21.2 billion in excess reserves, and interbank rates saw only a slight increase.

Proofreading by Jackson Otukho, copy editor at TUKO.co.ke.

Source: TUKO.co.ke