By Michael Lukorito
For decades, Kenya followed a familiar script to finance major infrastructure projects — roads, railways, ports, and power plants. The government borrowed at home and abroad, donors contributed, and any remaining gaps were filled through the national budget.
From President Daniel arap Moi’s heavy reliance on bilateral loans, to President Mwai Kibaki’s disciplined mix of concessional financing and tax revenue, and later President Uhuru Kenyatta’s aggressive borrowing — particularly from China — public debt remained central to development financing. Under President William Ruto, however, that model is being reviewed.
A look at Kenya’s debt trajectory illustrates why. When President Kibaki took office in 2002, public debt stood at roughly Sh900 billion, and it was largely concessional. By 2013, it had risen to about Sh1.8 trillion but remained manageable. Debt-to-GDP ratio hovered around 40 to 45 per cent, and servicing costs did not overwhelm revenues.
President Kibaki’s strategy emphasised improved tax collection and cautious borrowing, mainly from multilateral institutions like the World Bank and IMF, to fund infrastructure in roads and energy.
Under President Uhuru, the approach shifted dramatically. Public debt surged from Sh1.8 trillion in 2013 to about Sh8.7 trillion by 2022.
Kenya entered international capital markets through Eurobonds and expanded bilateral borrowing. Large-scale projects like the Standard Gauge Railway (SGR), highways, and energy developments were financed through this debt expansion.
However, the composition of debt changed significantly — commercial loans with higher interest rates and shorter maturities became dominant. Debt servicing costs rose sharply, at times consuming over 50 per cent of government revenues, while the debt-to-GDP ratio climbed above 65 per cent, raising sustainability concerns.
Read the full story in the next edition of The Nairobi Business Monthly, to be published on May 30.
