The Kenyan government borrowed Ksh 853.4 billion from local sources by the end of June 2025, surpassing its target of Ksh 825.8 billion.
According to the Treasury’s annual borrowing plan for the 2025/2026 financial year, The bulk of the financing came from commercial banks and non-banking financial institutions, with smaller amounts raised from government deposits and loan repayments.
Non-banking financial institutions such as pension funds, insurance firms, and SACCOs contributed Ksh 483.9 billion, while commercial banks followed closely, lending Ksh 368.2 billion through government securities like Treasury bills and bonds.
An additional Ksh 24.8 billion was drawn from government deposits, while Ksh 1.9 billion came from net receipts of loan repayments.
Kenya Raises Ksh 853.4 Billion Through Domestic Borrowing
National Treasury Cabinet Secretary John Mbadi said the domestic borrowing target was revised upward during the fiscal year to cover revenue shortfalls and underperformance in external financing.
“This necessitated additional resources from the domestic market to finance government expenditures within the fiscal targets that were supported by reducing interest rates and improved liquidity,” he said.
The borrowing formed part of the government’s wider financing strategy for the 2024/2025 financial year, where the overall net financing requirement reached Ksh 1.03 trillion (5.9 per cent of GDP), slightly above the target of Ksh 1.01 trillion (5.8 per cent of GDP).
This gap was covered through a mix of external borrowing (Ksh 178.9 billion, 1.0 per cent of GDP) and domestic borrowing (Ksh 853.4 billion, 4.9 per cent of GDP). As of June 30, 2025, net external financing stood at Ksh 178.9 billion, just below the target of Ksh 186.5 billion.
Total external disbursements amounted to Ksh 527.0 billion, comprising Ksh 151.4 billion in project loans, Ksh 113.7 billion in programme loans, Ksh 8.8 billion from OPEC funds, and Ksh 253.1 billion in commercial loans.
During the same period, the government made debt principal repayments of Ksh 348.1 billion, reducing the net inflows from external sources.
Also Read: Why Kenya Wants to Swap Ksh13 Trillion Debt for Food
Govt to Borrow Ksh 1.5 Trillion in FY 2025/26
Looking ahead, the government will require KSh 1.55 trillion in the 2025/2026 financial year to finance its operations and meet debt obligations.
Treasury data shows this amount, equivalent to 8 per cent of GDP, will be split between Ksh 901 billion to bridge the fiscal deficit and Ksh 646.3 billion to refinance maturing domestic and external debt.
This means a significant share of the funds sought will not only support new spending but also go toward servicing existing loans.
Kenya Eyes Ksh 901 Billion in Net Financing
The Treasury projects a net financing requirement of Ksh 901 billion for FY 2025/2026, or 4.7 per cent of GDP. Of this, Ksh 248.2 billion (1.4 per cent of GDP) will come from external borrowing, while Ksh 652.8 billion (3.3 per cent of GDP) will be raised locally.
This translates to 28 per cent of the financing from external sources and 72 per cent from domestic markets, underscoring Kenya’s heavy reliance on local borrowing to plug budget gaps.
Also Read: Moody’s Explains Why Loans in Kenya Are So Expensive
External Financing Plan
Within this framework, the Treasury has outlined plans to raise KSh 287.4 billion in net external financing during FY 2025/2026 to support the budget and refinance maturing obligations.
The inflows will comprise Ksh 221.2 billion from commercial borrowing, Ksh 211.2 billion from project loans, and Ksh 195.3 billion from programme loans.
These will be offset by external debt repayments amounting to Ksh 340.2 billion.
Follow our WhatsApp Channel and X Account for real-time news updates.
