By Benadeta Mwaura - Reporter
Kenya, May 11 ,2026 - Kenya’s latest debt conversation is no longer just about how much the country owes, it is increasingly about what is not fully visible on the balance sheet, and whether the economy can sustain a wave of ambitious projects at a time of fiscal strain.
At the core of the concern is what analysts describe as “hidden debt”, financial obligations that may not be captured in traditional public debt figures.
These include state guarantees, pending bills, public-private partnership (PPP) commitments, and off-balance-sheet borrowing structures.
The concern is that once fully accounted for, Kenya’s debt burden could be significantly higher than officially reported, potentially pushing it beyond already stretched thresholds.
Official figures already paint a tight picture. Kenya’s public debt has crossed Ksh 12.4 trillion, with the debt-to-GDP ratio hovering around 67–68 percent, well above the recommended 55 percent ceiling.
The National Treasury itself acknowledges that while the debt is still considered sustainable, the country faces a high risk of debt distress, with debt levels expected to remain above safe thresholds for several years.
At the same time, nearly half of government spending is now going into debt servicing, leaving limited fiscal space for development. This is where the debate around “hidden debt” becomes critical, because it raises the question: how much more can Kenya realistically take on?
Against this backdrop, Kenya is positioning itself for one of the most ambitious industrial investments in the region, a proposed oil refinery by Aliko Dangote.
The billionaire industrialist is considering building a 650,000-barrel-per-day refinery in Mombasa, a project estimated to cost between $15 billion and $17 billion (over KSh 2 trillion). This would mirror his Lagos mega-refinery and potentially transform East Africa’s energy landscape.
But the project is not happening in isolation. It sits at the centre of a regional contest, particularly with Tanzania’s Tanga port, where East African countries have also been discussing a joint refinery.
Kenya’s advantage lies in its larger economy and higher fuel consumption, making Mombasa a commercially attractive location. However, such a project raises a key fiscal question: If government incentives, guarantees, or infrastructure support are required, does Kenya have the fiscal headroom to back it without deepening its debt exposure?
Kenya’s own oil ambitions in Turkana further complicate the picture.
The Turkana oil project, once seen as a game-changer for Kenya’s energy independence, has faced delays, investor pullbacks and uncertainty over commercial viability.
Without a fully operational upstream sector, Kenya remains heavily reliant on imported refined fuel, making projects like the Dangote refinery more attractive but also more urgent.
In theory, a regional refinery, whether in Mombasa or Tanga, could process crude from Kenya, Uganda, South Sudan and DRC, creating a more integrated energy market.
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In practice, however, delays in Turkana mean Kenya risks becoming a consumer rather than a producer in its own energy value chain, limiting its leverage in such large-scale investments.
This is where the debt question becomes unavoidable.
On one hand, Kenya is pursuing large-scale infrastructure and industrial projects to drive long-term growth, ports, rail, energy and digital economy investments. On the other, it is managing a debt profile where:
- Debt levels are already above recommended thresholds
- Debt servicing is consuming a significant share of revenue
- New borrowing is increasingly shifting to the domestic market, crowding out private sector credit
The risk is not just the size of debt, but its structure and hidden exposure. If PPPs and guarantees tied to mega projects are not carefully managed, they can crystallize into direct public debt later, creating future fiscal shocks.
And what emerges is a delicate balancing act.
Kenya is trying to reposition itself as a regional economic hub, attracting billion-dollar investments like the Dangote refinery while simultaneously managing a high debt load and tightening fiscal space.
The strategy is clear: use large projects to unlock growth, industrialisation and energy security.
But the timing is critical.
If managed well, these investments could reduce long-term costs, for example, by cutting fuel import bills and stabilising energy supply. If mismanaged, they risk deepening debt vulnerabilities, especially if hidden liabilities materialise.
Kenya today sits at an economic crossroads where ambition meets constraint.
The push for mega investments, from oil refineries to regional infrastructure, signals confidence in the country’s long-term potential. But the rising scrutiny over hidden debt is a reminder that how these projects are financed matters just as much as whether they are built.
In the end, the question is not whether Kenya should invest, it must. The real question is whether it can do so in a way that balances growth with sustainability, ensuring that today’s opportunities do not become tomorrow’s debt traps.