Kenya Trapped in Debt Cycle as KSh. 7 of Every KSh. 10 Goes to Loan Servicing

Kenya’s public finances are being squeezed tightly. According to official reports from the Controller of Budget (CoB), a huge portion of every shilling Kenya spends on debt servicing goes to pay interest rather than reduce what is owed. This pattern is pushing the country into what many are calling a debt trap. The Star+2The Eastleigh Voice News+2

🔍 The Figures at a Glance

• In the 2024/25 financial year, Kenya’s domestic debt service was about KSh 1.05 trillion. Of this, KSh 632.3 billion was spent on interest alone, while only KSh 360.1 billion went toward paying down the principal. The Star+1

• That means roughly 60-65% of debt repayment is swallowed by interest. Some reports simplify this to “KSh 7 of every KSh 10” being used to pay interest.

• The country’s total public debt stood at KSh 11.73 trillion by end of June 2025. Domestic debt now makes up more than half of this burden. The Eastleigh Voice News+2The Standard+2

⚠️ Implications & Risks

1. Shrinking Fiscal Space
   When so much of the budget goes to just servicing interest, there’s less left over for essential services like health, education, infrastructure, and social welfare. MDAs are already reporting delays in funding. The Star+1

2. Vulnerability to Market Shocks
   Much of Kenya’s borrowing is short-term domestic instruments (treasury bills, etc.). When interest rates rise, or when there’s pressure on revenues, the burden increases fast. The Star+1

3. Debt Sustainability Threats
   If the trend continues, Kenya may struggle to meet both interest and principal payments without taking more debt — which makes the cycle worse. This can lead to risk of default, ratings downgrades, and higher borrowing costs. The Eastleigh Voice News+1

4. Development Projects Delayed or Cut
   Reports show that capital spending (roads, schools, hospitals) is being squeezed, with less funding available due to heavy debt obligations. The Star+1

👨‍⚖️ What the Controller of Budget Recommends

• Longer maturities for domestic borrowing — borrowing instruments that are due further in the future rather than short-term ones. This lowers rollover risk. The Eastleigh Voice News+1

• Rebalancing between domestic and external borrowing to mitigate high local interest costs. The Eastleigh Voice News+1

• Improving revenue mobilisation — collecting more taxes, managing leakages, etc.

• Reducing the interest burden by negotiating better terms where possible, and by using concessional/external funding more wisely.

Version 2 (Storytelling / Emotion + Facts)

Imagine having ten friends, and every time you earn KSh 10, you’re forced to give away KSh 7 not because you want to, but because someone else demands it before you can even start spending on food, school, or medicine. That’s very close to what Kenya is going through right now.

Kenya’s public debt has ballooned to over KSh 11.7 trillion, and the government now spends KSh 632.3 billion just on interest payments in one year — while only KSh 360.1 billion goes to reduce the actual debt. In other words, nearly two-thirds of what’s paid out in debt servicing is swallowed by interest. The Star

This means:

• Roads get delayed, hospitals wait, textbooks become luxuries.

• Revenue that could have built schools or improved water supply ends up in the hands of those who lent the money.

• The cycle repeats — to pay off debt you borrow more, interests go higher, you pay more interest, and before you know it, most of your budget is interest.

The Controller of Budget warns that borrowing has skewed heavily toward expensive domestic instruments like treasury bills. These cost a lot in interest and must be paid back or rolled over often. When you combine that with weaker revenues (taxes not coming in, economic challenges), Kenya is squeezed from both sides.

It’s not too late, but urgent reforms are needed:

1. Change how borrowing is done — more external concessional, long-term debt.

2. Use more money on collecting taxes fairly and efficiently.

3. Control leakages (waste, corruption, inefficiencies) so fewer shillings go missing.

4. Prioritise spending on essentials.

If things don’t change, Kenyans could see more of their hard-earned money going into paying off loans instead of improving lives. But with political will, transparency, and the right policies, it is possible to break the cycle.