Kenya has taken a bold step toward fiscal sustainability, with the national debt burden declining to 5.1% of GDP. This development signals a significant policy shift towards economic discipline, driven by comprehensive reforms outlined in the Finance Bill 2025. It reflects a broader government commitment to reduce overreliance on borrowing and build a foundation for long-term growth.
The Ministry of National Treasury and Economic Planning, under the stewardship of Cabinet Secretary John Mbadi and Principal Secretary Dr. Chris Kiptoo, has crafted a fiscal roadmap that prioritizes debt reduction, enhanced revenue collection, and expenditure rationalization. The Finance Bill 2025 encapsulates this vision by introducing targeted policies that aim to manage Kenya’s public finances more responsibly.
At the heart of the strategy is a shift toward revenue-led growth. The Bill proposes an expansion of the tax base, the introduction of revised excise and value-added tax (VAT) regimes, and progressive personal income tax brackets aimed at high-income earners. These measures are designed to increase government revenue without overburdening lower-income citizens. The integration of digital tax systems is also helping to close compliance gaps and increase collection efficiency.
On the expenditure side, the Finance Bill enforces stringent controls. Government ministries, departments, and agencies are now required to adopt program-based budgeting and results-oriented frameworks to ensure that public funds are directed toward impactful and essential services. Non-priority expenditures, travel allowances, and procurement inefficiencies have been curtailed as part of wider efforts to eliminate fiscal waste.
Debt management has also undergone significant restructuring. Kenya has historically relied heavily on short-term domestic borrowing, which often comes with high interest rates and repayment pressure. Under the 2025 Medium-Term Debt Management Strategy (MTDS), the government is now actively rebalancing its portfolio toward longer-term concessional loans. This shift reduces interest obligations and allows more flexibility in managing the debt repayment schedule.
The 5.2% debt burden figure referring to the primary deficit as a percentage of GDP indicates that Kenya is gradually moving away from fiscal deficit financing. By narrowing the gap between revenue and expenditure, the country is reducing the need for excessive borrowing, which had previously placed strain on public finances. The Treasury’s projections, backed by the Finance Bill, suggest that Kenya is on track to bring the overall public debt-to-GDP ratio below 55% by 2028.
The implications of this fiscal realignment are profound. Reduced debt obligations mean more resources can be allocated to developmental sectors such as healthcare, education, and infrastructure. This reallocation will not only improve service delivery but also stimulate economic activity and employment. Lower debt levels also boost investor confidence, strengthening Kenya’s position in international credit markets and opening doors to affordable financing for strategic projects.
Additionally, the focus on sustainability positions Kenya to better withstand external economic shocks. With a more manageable debt load, the government gains the flexibility to respond to emergencies such as global commodity price hikes or climate-related disasters without destabilizing its fiscal balance.
The Finance Bill 2025 represents more than a set of tax adjustments and spending plans it is a statement of intent. It reflects the government’s acknowledgment that past borrowing trends were unsustainable and that bold, forward-thinking policies are required to safeguard Kenya’s economic future. The Bill prioritizes fiscal discipline, equitable resource allocation, and transparent public finance management, establishing a strong framework for resilience and prosperity.
As Kenya advances along this new path, the declining debt burden stands as a tangible indicator of progress. With the Finance Bill 2025 as a foundation, the country is well-positioned to achieve inclusive economic growth, strengthen public institutions, and reduce vulnerability to debt-related crises. The momentum must now be maintained through consistent policy implementation, stakeholder collaboration, and a steadfast commitment to prudent fiscal governance.
