Kenya’s domestic debt stock has surged to $54.7 billion (KSh 7.052 trillion) as of February 20, 2026, according to the latest weekly bulletin from the Central Bank of Kenya, marking the first time the figure has crossed the KSh 7 trillion threshold.
This milestone was achieved in just 14 months after domestic debt surpassed $46.5 billion (KSh 6 trillion) in February 2025. The acceleration stands in sharp contrast to earlier milestones: it took a full decade to reach $31 billion (KSh 4 trillion) in December 2021, followed by roughly two years each to hit KSh 5 trillion in December 2023 and KSh 6 trillion the following year.
The rapid climb reflects intensified government reliance on local markets amid limited access to cheaper external financing and persistent fiscal deficits.
Government securities dominate the portfolio, with Treasury bonds comprising $44.5 billion (KSh 5.739 trillion), about 81% of the total and Treasury bills at $8.9 billion (KSh 1.144 trillion). The remaining portion includes a small overdraft at the Central Bank and other obligations.
Local financial institutions remain the primary holders: commercial banks, pension funds, and insurance companies account for nearly 79% of domestic securities, with banks alone holding around 36%.
This heavy domestic concentration has strengthened sovereign-bank linkages but also created challenges. Analysts note that ongoing large-scale government borrowing crowds out private sector credit, as banks prioritise safer government paper over loans to businesses, potentially slowing economic growth and infrastructure investment.
Debt servicing pressures are mounting across the broader public debt landscape. Interest payments on public debt totalling around $95 billion (KSh 12.3 trillion) as of late 2025 are projected to reach $9.3 billion (KSh 1.2 trillion) in the 2026/27 fiscal year, according to the Parliamentary Budget Office. This would consume more than 25% of the national budget, leaving limited room for development spending on roads, health, education, and other priorities.
The fiscal deficit for 2026/27 is expected to widen further, with net domestic borrowing projected at around $6.9 billion (KSh 890 billion) or more, alongside some external inflows. While the shilling has remained relatively stable, trading around 129 KSh per USD in early March, sustained domestic market reliance could eventually push yields higher if investor appetite wanes.
The trend underscores Kenya’s evolving debt strategy in a constrained global environment, where multilateral and commercial external options carry higher costs or conditionalities. Economists warn that without revenue-enhancing reforms or expenditure discipline, the trajectory risks entrenching a cycle of high interest burdens and reduced fiscal flexibility, heightening long-term sustainability concerns.
