The government is facing mounting pressure over its external debt obligations after Controller of Budget Margaret Nyakang’o issued a stark warning on the country’s fiscal outlook, citing a looming repayment burden of Sh3.32 trillion within the next year.
Appearing before Parliament, Nyakang’o cautioned that without urgent and credible fiscal consolidation measures, Kenya risks defaulting on its external debt commitments. The warning underscores growing concerns within oversight institutions about the country’s debt sustainability and liquidity position.
Her remarks come against the backdrop of a rapidly expanding public debt stock, which stood at approximately Sh12.29 trillion as of December 2025 equivalent to about 67.8 percent of GDP, well above the recommended threshold. The Controller of Budget noted that the rising cost of debt servicing is significantly constraining government spending, with a large portion of repayments going toward interest rather than reducing the principal amount.
Nyakang’o further highlighted structural weaknesses in Kenya’s borrowing framework, pointing to what she described as a “vicious cycle” where the government increasingly relies on new loans to service existing obligations. This practice, she warned, is eroding fiscal space and exposing the economy to heightened refinancing risks.
Of particular concern is the short-term nature of a significant portion of external debt, which creates pressure on the government’s cash flow and foreign exchange reserves. Legislators were also told that inefficiencies in project implementation have led to costly commitment fees on undisbursed loans, further compounding the debt burden.
The situation has already triggered liquidity challenges, with reports of delayed payments and cash rationing within government operations. Nyakang’o warned that unless corrective measures are taken—including stricter expenditure controls, improved debt transparency, and a shift toward concessional borrowing—the country could face deeper fiscal distress.
Her warning aligns with broader economic signals, including projections of a widening budget deficit driven by sustained borrowing and high debt servicing costs, as Kenya continues to balance development financing needs with fiscal stability.
The National Assembly’s Public Debt and Privatisation Committee is now expected to intensify scrutiny of borrowing practices and accountability mechanisms, as pressure mounts on the National Treasury to implement reforms and avert a potential debt crisis.
