High debt obligations and low revenue collection put Kenya's fiscal space at a crossroads, a move likely to further negatively impact the overall cost of living and doing business.
This is a verdict by the World Bank in its latest country focus, which was released on Monday in Nairobi.
According to the bank's 32nd Kenya Economic Update, the total stock of public debt has increased, reflecting ongoing macroeconomic vulnerabilities.
The country’s total public debt currently stands at Sh12 trillion or 68.7 per cent of Gross Domestic Product (GDP).
"A rise in the primary deficit contributed 1.3 percentage point growth in total public debt, with domestic debt remaining the largest component, reversing previous trends," the report reads in part.
Nevertheless, the country’s economy is expected to expand by 4.9 per cent on average for 2025-27, despite being exposed to elevated risks.
This is an upward revision compared to the May 2025 edition, supported largely by a stable monetary outlook arising from sound policies employed in the past six months.
For instance, the banking regulator has massively cut the base lending rate and revised risk loan pricing model. This is likely to trigger cheaper loans to businesses, ensuring stable money supply in the economy.
The country’s foreign reserve has risen to all-time high of just over Sh12 trillion supported by stable shilling against major international currencies and increased diaspora remittances and export earnings.
"Overall, Kenya's economic outlook remains subject to downside risks that could threaten growth, job creation, and macroeconomic stability."
The bank further warns that ongoing fiscal challenges, including missed consolidation targets and high recurrent expenditure, remain a key source of vulnerability.
