A nation’s economic sustainability largely depends on financial resources, primarily derived from taxation and borrowing.
Like many countries, Kenya relies heavily on these two sources to finance development projects and sustain government operations. However, the country’s increasing dependence on debt has raised concerns about its long-term economic stability.
Kenya is among the top 10 African nations with the highest outstanding credit from the International Monetary Fund (IMF), alongside Egypt, Angola, Ghana, and South Africa.
As of July 2024, Kenya’s public debt was estimated at Sh10.6 trillion ($82.5 billion), a sharp rise from 2022, when it stood at 68.4 per cent of GDP significantly higher than the sub-Saharan Africa average of 43.7 per cent.
A substantial portion of this debt is owed to China, accounting for approximately Sh814 billion ($6.3 billion), which makes up 64 per cent of Kenya’s bilateral external debt.
Additionally, the country owes Sh403 billion ($3.12 billion) to the IMF and Sh5.4 trillion to domestic financial institutions.
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This growing debt burden signals an urgent need for corrective measures to prevent further economic distress.
Compared to African nations with lower debt levels such as the Democratic Republic of Congo (14.6 per cent of GDP) and Botswana (19.9 per cent of GDP) Kenya’s debt levels are alarmingly high.
To address this, the government must adopt strategic reforms, including lowering interest rates to stimulate economic activity, curbing unnecessary expenditure, strengthening international financial cooperation, and reinforcing institutional frameworks to manage debt more effectively.
A high public debt, especially when it exceeds 85.5 per cent of GDP, poses a significant risk to economic growth.
Without decisive action, Kenya may face prolonged financial instability, hindering its ability to achieve sustainable economic development.
