Kenya is in talks with a major U.S. bank over a proposed Ksh129.7 billion debt swap as the government looks for ways to reduce pressure from heavy domestic borrowing.
According to Bloomberg, the bank has helped the National Treasury revive a deal that had previously stalled. The transaction could involve one of Kenya’s outstanding Eurobonds.
The proposed Ksh129.7 billion debt swap is expected to form part of a Ksh700 billion external financing programme for the financial year ending June 2027.
The programme includes a Ksh38.9 billion ($300 million) panda bond, a Ksh64.8 billion ($500 million) sukuk and a Ksh105.7 billion ($815 million) Eurobond sale.
Debt Swap Plans
Plans for a debt swap first emerged in 2024, ahead of a $2 billion Eurobond that matured in June that year.
At the time, the government was reported to be working with banks and investors to explore alternative financing arrangements that could help generate savings for social programmes.
In September 2025, the National Treasury formally included the strategy in its borrowing plans.
Treasury outlined negotiations for a proposed $1 billion debt-for-food security swap with the World Food Programme (WFP).
It is not clear whether the latest transaction being organised by the U.S. bank is connected to the proposed debt-for-food security swap.
However, Bloomberg reported that Kenya could use savings generated from the transaction to support food programmes.
The central purpose of the current proposal for the swap is to assist the Treasury in refinancing its existing debts under better terms, according to the report.
Kenya Encounters High Debt Costs
The National Treasury will incur expenditure of about Ksh2.31 trillion for servicing and payment of debts within the 2026/2027 financial year.
The government has increasingly relied on liability management techniques like buyback and refinancing as it struggles with high domestic and foreign debt maturities.
The debt service expenses are also projected to stay above Ksh2 trillion within the upcoming financial years due to high domestic debt maturities and continued refinancing of existing debts by the government.
No response has been received from the National Treasury and the U.S. bank as regards the current transaction proposal.
