Kenya's Debt Servicing and Pensions Use Over Half of Government Revenue

Spending on debt repayments and pensions accounted for 51.8% of Kenya's domestic revenues in the fiscal year to June 2026, with interest costs representing 42.7% and pension payments 9.1% of ordinary revenue. The National Treasury reported that debt service costs rose sharply, limiting fiscal space for development and other priority spending.

To bridge a projected fiscal deficit of 4.6% of GDP in the 2026/27 fiscal year, the Kenyan government plans to raise about KSh 1.03 trillion (US$7.6 billion) through domestic Treasury bonds and bills. A recent KSh 70 billion bond auction was oversubscribed by 206%, indicating strong demand from local pension funds, banks and insurers. Officials aim for a financing mix of roughly 75% domestic and 25% external borrowing, reflecting the difficulty of accessing external debt markets.

These fiscal pressures highlight the growing burden of debt servicing and pension obligations on Kenya's budget and the government's reliance on domestic capital markets to fund its deficit.