The government has released a new debt plan aimed at cutting the cost of paying and renewing Kenya’s public debt over the next three years.
In the Draft Medium-Term Debt Management Strategy for 2026/27 to 2028/29, the National Treasury says it wants to reduce pressure from high interest payments and frequent debt rollovers, which have weighed heavily on public finances.
A key part of the plan is to change how the government borrows. The Treasury intends to get most of its new loans from the local market, with 78 per cent of net borrowing coming from domestic sources and 22 per cent from foreign lenders.
By borrowing more at home, the government hopes to avoid losses caused by a weak shilling, which makes foreign debt more expensive to repay.
The strategy also focuses on reducing short-term borrowing, which forces the government to refinance its debt too often.
"the government aims to reduce debt costs and risks by sourcing 22.0% net borrowing from external sources & 78.0% from domestic sources," treasury said in its Draft Medium-Term Debt Management Strategy. Treasury Bills, especially those that mature within a year, have grown rapidly and now pose a major repayment risk. To address this, the government is considering changes to how it issues Treasury Bills and bonds so that debts are spread over longer periods and do not fall due all at once.
Another proposal in the strategy is the creation of a clear policy to guide how government bonds and Treasury Bills are issued and traded. The aim is to improve planning, reduce borrowing costs and make government debt easier to manage over time.
The Treasury has also flagged short-term foreign currency loans as a major problem, saying they strain cash flow and foreign exchange reserves. The new plan seeks to limit such borrowing to ease repayment pressure and reduce the risk of sudden debt shocks.
There is some positive news in the report. Government-backed debt has fallen by 16.9 per cent to Sh83.24 billion as of the end of June 2025. This drop is mainly due to Kenya Airways, whose government-guaranteed debt fell sharply after a restructuring deal with lenders.
Overall, the strategy shows the government’s intention to slow down debt growth, lower interest payments and avoid frequent refinancing. If implemented as planned, the measures could help stabilise public finances and free up more money for essential services and development projects.
