Kenya’s public debt, which reached 65.5 per cent of GDP by the end of 2024, is putting the country’s economic resilience at risk, the World Bank has warned.
According to a new report released by the Bank, interest payments are consuming nearly one-third of Kenya’s tax revenues, threatening the country’s fiscal sustainability and limiting investments in critical sectors such as infrastructure and human capital.
Weak Revenue Mobilization
The World Bank singled out the country’s low tax-to-GDP ratio, which it said is worsened by a narrow tax base and overreliance on consumption taxes.
“Kenya’s revenue performance continues to fall short, limiting the government’s capacity to fund development and social protection,” the report stated.
During the report’s launch, Treasury Cabinet Secretary John Mbadi acknowledged the findings, noting that Kenya must take bold steps to boost domestic revenue.
“We recognize the need for bold reforms in domestic revenue mobilization. Our goal is to ensure fiscal consolidation without hurting key service delivery sectors,” Mbadi said.
Debt Servicing Crowding Out Growth
The Bank cautioned that the cost of debt servicing is squeezing out vital spending, and warned of shrinking access to credit in the private sector, with lending to key industries such as manufacturing, mining, and finance turning negative by December 2024.
World Bank Senior Economist Naomi Mathenge attributed the contraction in credit partly to elevated interest rates.
“The cost of borrowing remains high, limiting access to credit by businesses. This is impacting employment and growth in key sectors,” she said.
Urgent Need for Reforms
While recent improvements in inflation and exchange rate stability offer some relief, the World Bank stressed that fiscal and structural reforms are critical to maintain macroeconomic stability.
World Bank Country Director Qimiao Fan urged the government to address inefficiencies in public spending and improve tax collection.
“Fiscal discipline, coupled with improved tax administration, is vital for restoring investor confidence and creating fiscal space for development priorities,” he stated.
The Bank projects that Kenya’s economy could grow by five per cent in 2026–27—but only if key reforms are implemented effectively.
The report calls for a medium-term revenue strategy, stronger public financial management, and increased access to concessional financing to help Kenya meet its development goals without deepening fiscal distress.
