Kenya seeks $260 million in market funding to cover budget shortfall

The Central Bank of Kenya (CBK) is inviting investors to inject approximately $260 million (Sh40 billion) into the government’s coffers through the reopening of two long-term Treasury bonds, aimed at supporting the national budget.

• The Central Bank of Kenya (CBK) is seeking $260 million (Sh40 billion) from investors through the reopening of 15-year and 25-year Treasury bonds.
• The funds will provide critical budgetary support as the government leans on domestic borrowing to ease fiscal pressure.
• Investors will earn annual returns of 12.34 percent and 14.19 percent, respectively, with trading set to begin on November 24.
• The move aligns with President Ruto’s plan to reduce Kenya’s reliance on external debt and strengthen the country’s financial stability.

In its November prospectus, the CBK announced that the 15-year and 25-year fixed-coupon bonds, both previously issued, are being reopened for new bids between November 11 and 19, 2025, with successful investors required to make payments by November 24, 2025.

“The Central Bank of Kenya, acting as fiscal agent for the Republic of Kenya, invites bids for the above bonds,” the statement read.

The 15-year bond offers an annual return of 12.34 percent, while the 25-year paper yields 14.19 percent, both subject to a 10 percent withholding tax.

Proceeds will go toward general budgetary support, as the government continues to rely on domestic borrowing to meet its financial obligations.

According to the National Treasury, Kenya’s total public debt increased by Sh250 billion (approximately $1.63 billion) between June and September 2025, primarily driven by domestic borrowing of Sh340 billion ($2.22 billion).

Meanwhile, external debt declined by approximately Sh80 billion ($520 million) over the same period.

This shift reflects President William Ruto’s ongoing push to reduce exposure to costly external loans, which often heighten foreign exchange pressures on the Kenyan shilling.

CBK noted that secondary trading for both bonds will begin on November 24 through the DhowCSD platform or licensed financial institutions, allowing investors to trade in multiples of Sh50,000 ($325).

The apex bank has also kept the rediscounting window open to enhance market liquidity, enabling bondholders to access short-term cash at a rate three percent above the prevailing market yield or coupon rate, whichever is higher.

Analysts view the reopening of these long-dated papers as part of CBK’s strategy to lengthen the maturity profile of domestic debt while offering investors stable, long-term income opportunities amid stabilising interest rates and easing inflation expectations.

The 15-year bond matures on July 10, 2034, and the 25-year bond on September 23, 2047. Market data suggests sustained interest in long-term instruments among pension funds and insurers, though retail investors remain largely absent due to high entry thresholds.

As Kenya balances fiscal consolidation with the need to maintain infrastructure and social spending, Treasury bonds remain a vital lever in its domestic resource mobilisation strategy.