Kenya’s external debt structure has had a reduction in the average time to maturity and grace period for new borrowings. According to recent data from the National Treasury, the average maturity of new external debt contracted to 15.6 years as of June 2025, down from 20.5 years in June 2024. Concurrently, the average grace period which refers to the interval before debt repayments commence, declined to 3.7 years from 4.4 years. This shift indicates that Kenya will have a shorter duration to repay its foreign obligations and less breathing space before beginning interest payments.
Despite these tighter repayment terms, the weighted average interest rate on new external debt decreased to 4.3 percent from 4.6 percent over the same period, offering some relief to the debt service burden amid a stable shilling. Furthermore, the average maturity is now the lowest since June 2019, while the grace period is the shortest recorded since at least 2017. These grace periods are typically associated with official bilateral and multilateral loans from institutions such as the International Monetary Fund and the World Bank.
Kenya’s Debt Profile
The composition of Kenya’s external debt stock has also evolved. The nation’s bilateral debt decreased by KES 51 billion to KES 1.11 trillion in June 2025, down from KES 1.16 trillion a year earlier. In contrast, multilateral debt rose by KES 259 billion to KES 3.04 trillion, and commercial debt increased by KES 105 billion to KES 1.31 trillion. Overall, the total external debt grew to KES 5.48 trillion from KES 5.17 trillion over the twelve-month period.
The Treasury has been actively pursuing strategies to manage the country’s debt profile, focusing on smoothing maturity schedules and alleviating near-term refinancing pressures. In February 2025, the government issued a new Eurobond worth KES 193.5 billion, maturing in 2036, and utilized part of the proceeds to repurchase a portion of the Eurobond due in 2026. Additionally, Kenya successfully renegotiated the terms of three Chinese loans financing the Standard Gauge Railway (SGR), extending their maturity from 2029 to 2040 and converting them into yuan-denominated facilities. This restructuring is projected to yield annual interest savings of approximately KES 27.7 billion.
Looking forward, the Treasury seeks to implement a range of debt management initiatives aimed at mitigating refinancing risks and containing the growing debt burden. These reforms include updating the national debt and borrowing policy to incorporate modern financial instruments such as derivatives, liability management operations, and associated tools like swaps, forwards, and options, while also addressing the corresponding risks.
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