Thursday, 5 March 2026 - Kenya’s domestic debt has officially crossed the KSh 7 trillion mark, reaching KSh 7.05 trillion as of February 20th, 2026, according to the latest weekly bulletin from the Central Bank of Kenya (CBK).
This milestone underscores the country’s
growing reliance on local borrowing amid constrained access to external
financing and persistent fiscal deficits.
Rapid Debt Growth in Record Time
The CBK data shows gross domestic debt at KSh
7.052 trillion, up from KSh 6.855 trillion on December 24th, 2025.
This represents a sharp increase of Ksh 197.31
billion in under two months.
By the end of December 2025, domestic debt
stood at Ksh 6.8 trillion, equivalent to 37.5% of GDP and 55.6% of total public
debt.
The pace of accumulation has also accelerated
dramatically.
It took a decade to reach Ksh 4 trillion in
December 2021, followed by two years each to hit Ksh 5 trillion in December
2023 and Ksh 6 trillion in February 2025.
Yet, in just 14 months, Kenya has added
another trillion, crossing the Ksh 7 trillion threshold in February 2026.
Debt Composition and Instrument Mix
Government securities remain the backbone of
domestic debt. As of February 20th:
Treasury bonds stood at KSh 5.739 trillion
Treasury bills at KSh 1.148 trillion
Combined securities totalled KSh 6.883
trillion
The overdraft at CBK was Ksh 63.58 billion,
while other domestic obligations amounted to Ksh 105.85 billion.
Treasury bonds continue to dominate at 81.38%
of the debt stock, but Treasury bills have edged up to 16.22%, signaling rising
short-term funding pressures and heavier rollover risks in the second half of
the fiscal year.
Who Holds Kenya’s Domestic Debt?
Financial corporations held 79.2% of
government securities.
Commercial banks accounted for 35.7%, up from
34.5% in December, tightening the sovereign-bank nexus and crowding out private
sector credit.
Pension funds held 14.4%, while insurance
companies held 13.6%.
Non-residents accounted for just 4.6%,
reflecting limited foreign appetite for local-currency Government paper.
Fiscal Pressure and Borrowing Targets
The breach of Ksh 7 trillion comes at a time
of narrowing fiscal space.
Kenya has already deployed Ksh 554.96 billion
of its Ksh 634.75 billion domestic borrowing target for FY 2025/26 -
representing 87.4% of the full-year envelope with half the fiscal year still
remaining.
At the current pace, the Government risks
exhausting its borrowing headroom well before June, raising the likelihood of
either revising targets or turning to external markets to plug financing gaps.
"Debt isn't just a balance sheet issue
but a structural chokehold. By burning through 87.4% of its domestic borrowing capacity this
early in the fiscal calendar, the government has essentially become a liquidity
vacuum. Commercial banks are naturally taking the easy, risk-free yield, which
systematically starves the private sector of the credit it needs to drive real
economic recovery." - Terence Hove, Senior Financial Markets Strategist at
Exness
Risks to Growth and Sustainability
Analysts warn that heavy domestic borrowing
strengthens sovereign-bank linkages but also creates challenges.
Large-scale Government borrowing often crowds
out private sector credit, as banks prefer the safety of Government securities
over lending to businesses.
This dynamic could slow economic growth, limit
infrastructure investment and stifle entrepreneurship.
Interest payments are another looming concern.
With total public debt around Ksh 12.3
trillion as of late 2025, the Parliamentary Budget Office projects debt
servicing costs to hit Ksh 1.2 trillion in FY 2026/27.
This would consume more than 25% of the
national budget, leaving limited fiscal room for development spending on roads,
healthcare, education and other priorities.
Outlook
Economists caution that without
revenue-enhancing reforms or expenditure discipline, Kenya risks entrenching a
cycle of high interest burdens and reduced fiscal flexibility.
The breach of Ksh 7 trillion in domestic debt
is not just a symbolic milestone - it is a warning signal of mounting fiscal
pressures that could challenge long-term sustainability.
The Kenyan DAILY POST
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