The African Development Bank (AfDB) has once again raised concerns over Kenya’s growing dependence on Eurobonds and commercial loans, warning that high yields and short repayment periods could worsen the country’s fiscal strain—despite ongoing efforts by the government to manage debt obligations.
Kenya currently holds six active Eurobonds maturing between 2024 and 2048, with yields among the highest in Sub-Saharan Africa. The 2024 Eurobond issuance was priced at 10.35%, well above the regional average of 7.6–10.7%.
While the National Treasury maintains that the borrowing is necessary to refinance maturing debt, economists caution that the pattern risks locking Kenya into a costly debt-servicing cycle that undermines funds for development projects.
By mid-2025, Kenya’s public debt stood at approximately KSh 11.9 trillion (USD 83 billion) — around 66% of GDP. Although this represents a slight improvement from 2024’s 65.7%, it is largely attributed to the shilling’s appreciation and improved fiscal controls.
Debt servicing remains a significant challenge, consuming over 60% of domestic revenues, while external reserves have fallen from USD 9.49 billion in 2021 to just over USD 7.4 billion in 2023.
These figures underscore the country’s shrinking fiscal space and rising vulnerability to global interest rate and currency shocks.
In October 2025, the government under President William Ruto made a strategic move to mitigate repayment risks by issuing a new USD 1.5 billion Eurobond to partially buy back its USD 1 billion 2028 note.
The issuance was met with strong investor appetite, oversubscribed more than four times, and structured into two tranches:
• A seven-year USD 750 million note at 7.875%, maturing in 2033, and
• A twelve-year USD 750 million note at 8.8%, maturing in 2038.
Unlike previous bonds, this issue adopted an amortising structure, enabling Kenya to repay the principal in instalments—an approach designed to spread out the repayment burden and improve fiscal stability.
According to the AfDB’s Africa Economic Brief, Kenya’s proactive refinancing efforts have restored investor confidence.
However, the bank cautions that the country’s overreliance on dollar-denominated commercial debt still presents macroeconomic risks, particularly in the event of global market volatility or currency depreciation.
The AfDB recommends that Kenya:
• Diversify its loan portfolio to include more concessional and long-term financing,
• Strengthen the Debt Management Office (DMO) to enhance fiscal risk assessment, and
• Implement stronger transparency and accountability measures in debt reporting.
Economists echo the same sentiment—stressing that borrowing must be matched with discipline, efficiency, and fiscal reforms. Expanding the tax base, cutting wasteful expenditure, and prioritising value-driven public investments are critical to ensuring long-term debt sustainability.
Without these reforms, analysts warn, Kenya could remain trapped in a cycle of refinancing debt instead of reducing it — a pattern that could compromise development ambitions and leave the economy dangerously exposed.
While Kenya’s Eurobond strategy has bought the government breathing space and investor goodwill, the warning from AfDB is clear: the country must shift from debt dependency to disciplined fiscal management.
As the Ruto administration pushes its economic transformation agenda, sustainable borrowing and transparent debt management will determine whether Kenya can balance growth with stability—or slide further into a costly debt trap.
