Kenya’s public debt servicing costs escalated by KSh68.7 billion in the first half of the 2024/25 fiscal year, primarily due to increased domestic interest rates. The Controller of Budget’s latest report indicates that from July to December 2024, the government spent KSh666.3 billion on debt servicing, up from KSh597.6 billion in the same period the previous year.
A significant contributor to this surge was the interest payments on domestic debt, which rose 2.6 times to KSh325.7 billion. This increase coincided with the domestic debt stock growing from KSh5.41 trillion in June 2024 to KSh5.87 trillion by December 2024.
The rise in domestic borrowing and higher interest rates have intensified the fiscal pressure on the government, limiting its capacity to fund development projects. This fiscal strain has prompted the government to seek new funding arrangements with international financial institutions, including the International Monetary Fund (IMF).
As Kenya navigates these fiscal challenges, the government is exploring various strategies to manage its debt sustainably. These include engaging in new lending programs with the IMF and considering alternative financing options to mitigate the impact of rising debt servicing costs on the economy.
Kenya’s Fiscal Challenges and IMF Engagements
