Kenya Seeks Debt Relief as Treasury Engages World Bank Amid Rising Fiscal Pressures

Kenya has intensified its push for debt relief and economic support as Treasury Cabinet Secretary John Mbadi led a high-level delegation for bilateral discussions with the World Bank, amid growing concerns over the country’s unsustainable debt levels and shrinking fiscal space.

The meetings, held alongside the ongoing IMF and World Bank Annual Meetings, come at a pivotal time.

Kenya’s public debt has exceeded KSh 11 trillion, representing close to 70 percent of GDP, a level that economists warn poses significant risks to economic recovery and macroeconomic stability.

Speaking after his engagement with World Bank executives, Mbadi acknowledged the urgency of the fiscal challenges, saying the government was actively seeking both debt restructuring options and new concessional financing to ease short-term repayment pressures.

“We are not shying away from the realities of our debt burden,” Mbadi said.

“Our objective is to negotiate sustainable solutions that can help us create fiscal room without undermining our development agenda.”

Kenya’s high debt servicing obligations have become a growing liability, consuming over 50 percent of tax revenues.

This has left limited resources for development and essential public services, even as the country grapples with unemployment, a rising cost of living, and infrastructure needs.

“Debt is not inherently bad, but when the cost of borrowing crowds out investments in health, education, and job creation, it becomes a constraint on our national priorities,” Mbadi stated.

“That’s why we are pushing for a smart rebalancing of our obligations.”

Kenya’s approach now includes expanding concessional borrowing, restructuring existing commercial debt, and enhancing fiscal discipline through reforms in revenue collection and expenditure management.

The World Bank acknowledged these steps, commending recent Liability Management Operations that have focused on extending maturities and reducing refinancing risks.

“We are exploring every avenue to reduce the cost of debt, including engaging our bilateral and multilateral partners,” Mbadi noted. “Our focus is not just on today’s repayments, but on ensuring a viable economic future.”

Despite the debt overhang, Mbadi painted a cautiously optimistic picture of the broader economic landscape. He pointed to stabilized inflation, a more predictable exchange rate, and adequate foreign exchange reserves—now covering over five months of imports.

“The fundamentals are holding up. Inflation is within target, and the currency has shown signs of strengthening. These are positive signals, but we’re aware that fiscal pressures could undermine these gains if not addressed,” he said.

Mbadi also highlighted Kenya’s compliance with existing IMF program benchmarks, noting that the government had made progress in areas such as public finance transparency, tax reform, and digitalization of procurement systems.

“We are demonstrating seriousness. This is not about ticking boxes; it's about building a more resilient economy that can withstand shocks,” he said.

Kenya’s delegation underscored the country’s ongoing commitment to structural reforms, many of which are central to restoring market confidence.

The National Treasury has prioritized improving the efficiency of tax collection, curbing wasteful spending, and increasing accountability in public debt reporting.

“Our reform agenda is not donor-driven—it is necessity-driven,” Mbadi explained. “Kenyans deserve a government that manages resources responsibly and delivers results.”

Market analysts have noted that investor sentiment toward Kenya has slightly improved in recent months, partly due to the government’s engagement with international lenders and efforts to manage its Eurobond maturities.

However, risks remain high, especially with significant external obligations falling due in the next two years.

While Kenya’s efforts have drawn cautious praise from global financial institutions, the road ahead is anything but straightforward.

The government must strike a balance between austerity and growth, all while managing public expectations and political pressures.

“We are walking a tightrope,” Mbadi admitted. “But we believe that with discipline, partnership, and focus, we can turn the corner and emerge stronger.”

He emphasized that the talks with the World Bank were not just about financial support, but about creating a longer-term framework for collaboration on areas such as climate resilience, infrastructure, and social protection.

“This is a pivotal moment for Kenya. We have an opportunity to reset our fiscal path and strengthen the foundations of our economy. But it will take courage and commitment from all stakeholders.”

As negotiations continue, Kenya’s strategy will be closely watched by investors, credit rating agencies, and citizens alike.

Whether the country can secure the debt relief and financing it seeks—while maintaining reform momentum—may well define the trajectory of its economy for years to come.