Kenya’s worsening debt situation has once again come under sharp focus after Margaret Nyakang’o issued a stark warning to Parliament, saying the country risks sinking deeper into a dangerous debt trap driven by costly borrowing and poor project coordination.
Appearing before the National Assembly of Kenya Committee on Public Debt and Privatization, chaired by Shurie Abdi Omar, the Controller of Budget painted a grim picture of the country’s financial health, describing what she termed a “vicious cycle of debt accumulation” that is steadily eroding fiscal stability.
Dr. Nyakang’o revealed that Kenya’s public debt had risen to KSh 12.29 trillion as of December 2025, equivalent to 67.8 percent of GDP, far above the legal ceiling of 55 percent. Even more alarming, she said, is the growing cost of servicing the debt.
“Half of debt payments are only financial costs rather than debt reduction. The principal figure is not reducing—we are simply paying interest,” she told lawmakers.
According to the Controller of Budget, interest payments alone have now hit KSh 464.49 billion, accounting for 54 percent of total debt service, leaving the government with little room to fund development projects or essential services.
Borrowing to repay loans
The committee was left stunned when Dr. Nyakang’o admitted that the government has increasingly been borrowing new money just to repay existing loans — a move she described as “hazardous borrowing.”
When MPs pressed her on whether domestic borrowing is now being used to repay external debt, she responded candidly: “Yes. Yes. And yes… we do this all the time.”
She further blamed poor coordination between the National Treasury of Kenya and project implementers for billions of shillings lost through commitment fees — charges paid on loans that remain unused because projects are not ready.
The Controller of Budget cited major projects including Konza Technopolis and Kenya Power initiatives, some dating back to 2017, where loans were signed before proper planning was completed.
“We find ourselves in a debt trap where we sign for loans when we are not ready. Treasury mobilises funds without ensuring implementers are prepared,” she said.
She also warned that the country is already facing a liquidity crisis, forcing the government to ration cash and delay critical payments — including salaries.
“We are seeing a situation where even salaries are paid in bits due to cash-flow constraints,” she told the committee.
Dr. Nyakang’o also criticised the continued use of Article 223 of the Constitution to fund expenditures that had previously been rejected by Parliament, describing it as a “back door” that undermines financial discipline.
To avoid further damage to the economy, the Controller of Budget urged the government to shift towards concessional loans, strengthen transparency in borrowing, and ensure evidence-based analysis before taking on new debt.
The parliamentary committee has now resolved to launch a separate inquiry into commitment fees — a move that could expose officials responsible for the billions lost in stalled projects.
