Kenya’s debt burden tops 68% of GDP – World Bank

Kenya continues to face a high risk of debt distress, according to the World Bank’s latest economic update.

• The World Bank warns Kenya remains at high risk of debt distress, with public debt climbing to 68.8% of GDP in FY24/25. 
• Domestic borrowing now makes up over half of total debt, driven by infrastructure and social spending. 
• Kenya recently converted a $5 billion Chinese loan to yuan, cutting interest rates and saving $215 million. 
• Despite these risks, economic growth is projected at nearly 5% this year, supported by construction, diaspora inflows, and robust forex reserves.

The lender’s Kenya Economic Update, published on Monday, November 24, reports that public debt rose to 68.8 % of GDP in FY 2024/25, up from 67.5 % in the previous year. Domestic debt now accounts for 53.6 % of that figure.

Net domestic borrowing reached about 5 % of GDP during the review period, mainly driven by infrastructure investment, social‑programme spending, and debt‑servicing obligations.

“Fiscal strains are deepening as public revenues continue to underperform. Public debt has continued to rise, with a large portion of it being domestic debt, increasing risks,” said Qimiao Fan, Division Director at the World Bank.

The warning comes shortly after Kenya’s government disclosed that it had converted a major existing loan from China, initially secured in 2014 for the construction of the Nairobi‑Mombasa Standard Gauge Railway, from US dollars to renminbi. The loan was valued at approximately $5 billion.

Finance Minister John Mbadi described the move as “part of a bold push to ease the pressure on the country’s debt stock, which nearly doubled as a percentage of GDP between 2013 and 2023.”

Kenya is heavily exposed to Chinese bilateral lending. Two of the railway loans had interest margins of 3 % and 3.6 % above the US market rate, and by 2023, those margins had more than doubled, government data show.

The switch to yuan-denominated borrowing and the re‑profiling of maturities are expected to help Kenya secure an interest rate of 3 % while saving around $215 million in servicing costs, the treasury says.

On a more positive note, the World Bank projects Kenya’s economy will grow nearly 5 % this year, an upgrade of 0.4 percentage points from its May forecast of 4.5 %.

The revision is underpinned by intense activity in the construction sector, buoyant diaspora inflows, improved export receipts, and rising Eurobond issuance and development‑partner funding.

Kenya’s foreign‑exchange reserves have reached a record high of $12.19 billion (equivalent to around 5.3 months of import cover) as of October 30, 2025, well above the statutory minimum of four months.

Despite the growth upgrade, the World Bank cautions that the country’s vulnerability remains elevated because its debt stock continues to rise and revenues are underperforming.

With domestic debt now accounting for more than half of total debt and repayment burdens mounting, analysts say Kenya must ensure robust reforms to secure its fiscal footing in a complex global and regional environment.