The National Treasury has reversed course on arrangements to balance domestic and external borrowing after realizing how tough a hurdle it is to source financing from outside.
The Exchequer set out to find a balance between sourcing money from outside and tapping local markets last year. The government has recently shifted its borrowing mix toward the domestic market; nevertheless, as part of a change in policy. This implies that it will reduce its dependency on outside borrowing while raising a greater portion of money domestically through Treasury bills, bonds, and the privatization of its parastatals.
The action indicates a shift in the priorities for debt management, most likely with the goal of lowering exposure to foreign exchange risks and protecting the economy from demands on global financing. In the fiscal year 2025/2026, Kenya’s 4.29 trillion budget had a deficit of KES 901 billion, equivalent to 21.5% of the total budget. The Treasury plans to borrow KES 613.5 billion locally and KES 287.4 billion externally, with a projection to issue securities of KES 634.8 billion and raise KES 149 billion from the privatization of parastatals, including the Kenya Pipeline Company.
The Finance Ministry intends to raise KES 100 billion from the sale of a 65% stake or 11,812,645 shares of the energy firm. The fiscal authority will also acquire financing domestically from loan settlements totaling KES 11.9 billion.
Treasury Bonds
The National Treasury stated that fixed-rate bonds with 2 to 25 years of maturity will be issued, alongside infrastructure bonds to cement domestic funding. The two securities remain attractive to investors, with the former having predictable returns since the interest rate remains constant through the bond’s life, shielding bondholders from falling interest rates. The latter exempts investors from withholding tax on the interest earned, offering more returns than normal bonds.
Kenya’s Public Debt
According to CBK’s September 5, 2025, Weekly Bulletin, Kenya’s public debt stood at KES 11.8 trillion, equivalent to 69% of the Gross Domestic Product (GDP). Domestic debts totaled KES 6.3 trillion, which translates to 53.4% of the total debt, while external debts amounted to KES 5.5 trillion, or 46.6%.
Also Read: UBA Group Plc Invests $150M to Boost Roads Bond
