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Kenya Breaches Debt Ceiling as AfDB Faults Parliamentary Oversight

Kenya has violated its own fiscal guardrails, with public debt climbing to 67.3 percent of GDP in early November, well above the 55 percent limit set under national law.

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The breach of the Public Finance Management Act threshold marks a critical juncture for East Africa’s largest economy, where years of infrastructure spending have pushed borrowing to unsustainable levels.

Weak Oversight Fuels Borrowing Binge

The African Development Bank has laid blame squarely on institutional failures, saying both Parliament and the National Treasury lack the technical capacity to properly evaluate loan proposals and assess their long-term fiscal impact.

This weakness has allowed the government to sign expensive financing deals with opaque terms, the regional lender warns. Without adequate scrutiny, Kenya has accumulated debt through poorly negotiated agreements that carry hidden costs and unfavorable conditions.

The assessment suggests a pattern: loans approved without rigorous analysis of repayment capacity, interest rates, or currency risks. The result is a debt portfolio that has grown faster and cost more than necessary.

Mbadi Promises Course Correction

Finance Minister John Mbadi has proposed a borrowing cap of KSh 901 billion for 2025 as part of a fiscal adjustment plan designed to bring debt back under control. His strategy targets a return to the 55 percent threshold by 2027-2028 through a combination of revenue improvements and budget cuts.

Yet skepticism persists. Kenya has run budget deficits for years, and previous consolidation efforts have fallen short. Critics question whether the government can simultaneously slash spending, boost tax collection, and maintain public services without triggering economic slowdown or social unrest.

Infrastructure Gamble Backfires

The debt explosion stems largely from Kenya’s bet on infrastructure-led growth. Roads, railways, and power projects were financed through heavy borrowing on the assumption that economic expansion would make the debt manageable.

That calculation now looks questionable. While infrastructure may deliver returns over time, the immediate burden of servicing expensive loans is crowding out other spending priorities and limiting the government’s room to maneuver.

The legal breach adds a new complication: Parliament may now be forced to exercise closer scrutiny over future borrowing, potentially slowing access to credit just as the government seeks to refinance maturing obligations.

Treasury officials have yet to address how they plan to strengthen the loan evaluation process or respond to the AfDB’s criticism of institutional capacity.