Kenya Sovereign Debt Market Overview – 2025 Edition
Published by Impala Market
📌 Executive Snapshot
Total Public Debt: KES 12.06 trillion (~USD 93.3 billion) as of Q3 2025.
Debt-to-GDP Ratio: ~67.3% (trending down from 73% in 2023 but remaining above the 50% IMF threshold).
Debt Composition: ~55% Domestic | ~45% External.
Outlook: Kenya’s debt profile has stabilized following a successful 2024 Eurobond buyback and currency appreciation. However, the pivot to domestic borrowing—while reducing FX risk—has kept the interest burden high even as yields begin to moderate from 2024 peaks.
🔍 1. Debt Market Structure
1.1 Total Public Debt Profile
Domestic Debt: KES 6.66 trillion
External Debt: KES 5.39 trillion
Interest-to-Revenue Ratio: ~30–35% (World Bank, 2025). While the “Debt Service” ratio is higher, interest payments alone now consume a significant portion of tax revenue.
Source: National Treasury Quarterly Debt Reports & CBK Weekly Bulletins.
1.2 Legal & Institutional Framework
Governance: Managed by the Public Debt Management Office (PDMO) within the National Treasury.
Execution: The Central Bank of Kenya (CBK) acts as the fiscal agent for domestic auctions.
Regulatory Basis: Public Finance Management (PFM) Act, 2012, which mandates transparency and sets borrowing guidelines.
🏦 2. Domestic Debt Instruments
InstrumentCurrencyMaturityFrequency2025 Yield TrendsTreasury BillsKES91, 182, 364 daysWeeklyDown: 91-day paper fell from ~16% to ~7.9% in late 2025.Treasury BondsKES2–30 yearsMonthlyModerating: 10-year benchmark yields have cooled to ~12.7%–13%.Infrastructure Bonds (IFB)KES5–25 yearsPeriodicHigh Demand: Remain the “darling” of the market due to tax-exempt status.
Retail Revolution: The DhowCSD mobile platform has fundamentally changed the market, allowing Kenyans in the diaspora and at home to invest with as little as KES 50,000.
Liability Management: The CBK is increasingly using Switch Auctions to convert short-term T-bills into longer-term bonds to manage the “maturity wall.”
🌍 3. External Sovereign Debt
Multilateral (56.7%): Now the largest share of external debt, led by the IMF and World Bank. This reflects a shift toward concessional, cheaper funding.
Eurobonds (Commercial): Kenya successfully navigated the February 2024 “maturity cliff.” Currently, USD-denominated Eurobonds are trading with improved sentiment compared to 2023.
Bilateral (18.5%): China remains the largest bilateral lender, though the share is shrinking as Kenya prioritizes multilateral funding.
👥 4. Investor Base
Domestic (Tier 1): Commercial Banks (the largest holders), Pension Funds (NSSF), and Insurance firms.
Retail Growth: Individual investors now represent a growing share of the domestic market via DhowCSD.
Foreign Investors: Becoming more active in local currency bonds again in 2025 as the Shilling stabilized and inflation dropped to ~4.5%.
🔁 5. Secondary and OTC Market
Venue: Listed bonds trade on the Nairobi Securities Exchange (NSE).
Liquidity: Most trading occurs Over-the-Counter (OTC) between banks but is settled via the CBK’s Central Depository System.
Innovation: Introduction of the Global Master Repurchase Agreement (GMRA) is expected to deepen the horizontal repo market (interbank lending using bonds as collateral).
📊 6. Recent Trends & 2025 Outlook
Yield Curve Normalization: The “inverted” yield curve of 2024 has begun to flatten as short-term rates drop faster than long-term rates.
Green Finance: The National Treasury is finalizing the Sovereign Green Bond Framework for a potential 2026 issuance.
Fiscal Consolidation: The 2025/26 budget focuses on aggressive revenue mobilization to narrow the deficit to below 4.0% of GDP.
⚠️ 7. Risk Assessment
Sustainability: IMF DSA (2024/25) maintains a “High Risk” rating, primarily due to high interest costs rather than total volume.
Revenue Risk: While debt is stabilizing, missed tax collection targets remain the biggest threat to the “fiscal consolidation” narrative.
Global Rates: If the US Fed holds rates “higher for longer,” it limits Kenya’s ability to return to international markets for cheap refinancing.
✅ 8. Strategic Opportunities
Local Currency Bias: Reducing exposure to USD-denominated debt to insulate the budget from Shilling volatility.
NSE Liquidity: Continued reforms to move more OTC trading onto the NSE platform to improve price discovery.
ESG Integration: Attracting “impact” capital through ESG-linked debt instruments.
📎 9. Annexes & Ratings
Current Credit Ratings (Updated Q4 2025):
S&P: B (Stable) — Upgraded from B- in mid-2025.
Moody’s: Caa1 (Positive) — Outlook improved in early 2025.
Fitch: B- (Stable).
Resources:
📬 For Investors & Researchers
Kenya’s debt market has moved from a state of “crisis management” in 2023 to “strategic consolidation” in 2025. For the fixed-income investor, the falling yield environment offers potential for capital gains on existing long-term holdings.