Kenya’s domestic debt has crossed the KSh 6.1 trillion mark, highlighting the government’s increasing reliance on the local financial market to fund its operations in the face of constrained external financing and widening budget deficits.
According to the Central Bank of Kenya’s latest figures, gross domestic debt stood at KSh 6.311 trillion as of July 4, 2025, up from KSh 5.410 trillion a year earlier. This represents a nearly 17% year-on-year increase, with Treasury bonds making up the lion’s share of the borrowing.
Treasury bonds remain the government’s preferred instrument, accounting for 83.1% of total domestic securities. The outstanding value of bonds stood at KSh 5.11 trillion, unchanged from the previous week, but up by over KSh 482 billion from July 2024.
In contrast, Treasury bills, which are short-term instruments, have grown more gradually, currently standing at KSh 1.036 trillion about 16.87% of all domestic securities.
The shift toward longer-term debt reflects a strategic move to ease pressure on near-term repayments and manage refinancing risks.
Rising Overdraft and Other Debt Pressures
The government’s overdraft at the Central Bank—often used to manage urgent cash flow needs has jumped to KSh 53.4 billion, up from KSh 37.5 billion at the end of June. This signals rising fiscal pressure and tighter liquidity conditions in recent weeks.
“While an overdraft facility is legal under the CBK Act, its expansion raises concerns about the sustainability of short-term borrowing to cover recurrent expenses,” a senior economist at a Nairobi-based investment bank noted.
Other domestic debts, including IMF funds on-lent to government, stood at KSh 111.48 billion, maintaining a steady upward trajectory.
Local Investors Still Buying In
Despite mounting debt levels, local appetite for government securities remains strong. Commercial banks remain the dominant holders of domestic debt, accounting for 45.03%, followed by pension funds at 28.82%. Insurance firms and retail investors round out the mix.
The July 9 bond auction saw a performance rate of 153.8%, receiving bids worth KSh 76.9 billion against the advertised KSh 50 billion, reflecting strong investor confidence—likely driven by attractive yields amid a high-interest-rate environment.
With total public debt now nearing KSh 11.4 trillion, the spotlight is once again on fiscal consolidation and how the government plans to manage debt without dampening growth.
