Kenya: Public Debt Declining, Economic Improvement in Sight
Significant decline in debt-to-GDP ratio
In 2024, Kenya’s public debt will stand at 63% of gross domestic product (GDP), compared with 68.7% in 2023. This reduction, announced by Finance Minister John Mbadi on February 13, is attributed to the strengthening of the local currency and fiscal consolidation efforts. Total outstanding public debt reached Ksh10,560 billion (USD81.71 billion) in June 2024.
Encouraging outlook despite budgetary challenges
The government forecasts a further decline in the debt-to-GDP ratio to 62.8% for fiscal 2024-25. However, public debt management remains a major issue, fueling popular protests against new taxes. Faced with this pressure, the authorities revised the Finance Law 2024/2025 and launched an audit of public borrowing in September 2024.
A financial strategy combining tax adjustments and external financing
The withdrawal of certain tax measures has temporarily slowed down the mobilization of public revenues. To maintain a balanced budget, Kenya plans to negotiate a new agreement with the International Monetary Fund (IMF) after the current program expires in April 2025. In addition, the government may issue a new Eurobond, after having honored the USD 2 billion repayment of a Eurobond maturing in June 2024.
Improving budget deficit
The budget deficit has been reduced from 4.4% of GDP in 2023 to 3.6% in 2024. This improvement is due to a more favorable trade balance, supported by dynamic exports and rising remittances from the Kenyan diaspora. Real GDP growth, estimated at 4.6% in 2024, should reach 5.3% in 2025 and 2026.
Towards tighter budget management
The government plans to adopt “zero-based budgeting” for the 2025-26 financial year. This approach aims to optimize the use of resources and reduce unnecessary spending, thereby strengthening the country’s economic stability.
Conclusion: A monitored recovery
Although Kenya’s debt-to-GDP ratio has improved and the budget deficit is on the decline, vigilance is still required. Revenue mobilization and prudent borrowing management will be crucial to maintaining this positive momentum and ensuring the country’s economic stability.
