What Kenya Plans To Borrow To Address Budget Deficit

The Kenyan government plans to secure Sh112 billion in concessional loans from the World Bank and the African Development Bank (AfDB) by the end of June 2025 to address the Sh887 billion budget deficit for the 2024/25 financial year.

The National Treasury indicates that Sh78 billion will be sourced from the World Bank, while Sh34 billion is expected from the AfDB.

This external financing is part of a broader strategy to manage the country’s fiscal challenges amid rising public debt, which has surpassed Sh11 trillion.

The government aims to reduce reliance on domestic borrowing, which often carries higher interest rates and can crowd out private sector credit.

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In addition to these loans, Kenya is exploring other funding avenues. The government has been in discussions for a Sh194.2 billion ($1.5 billion) bond placement in the United Arab Emirates, intended for liability management and budgetary support.

However, Finance Minister John Mbadi stated that the drawdown of this bond will be aligned with the current fiscal framework.

The Treasury is also implementing measures to enhance fiscal discipline. A proposal has been made to cut the 2024/25 budget by Sh267.5 billion due to underperforming revenues and increasing public debt.

This would reduce total expenditure to Sh3.92 trillion, with significant cuts in both recurrent and development spending.

Despite these efforts, the fiscal deficit remains substantial. The government projects a deficit of Sh773 billion for the 2024/25 financial year, to be financed through domestic borrowing of Sh413 billion and external loans worth Sh360 billion.

The 2024/25 budget prioritizes infrastructure, education, health, and social protection programs.