How Kenya’s rising public debt is crowding out private businesses

Kenya's rising public debt is becoming a major issue for private businesses, banks and policymakers, according to stakeholders who convened the inaugural Multisectoral Forum on Public Debt Management. The forum, held on August 20, 2026, highlighted how government borrowing could limit the private sector's access to affordable credit.

When the government borrows heavily from the domestic financial market, banks often prefer buying government securities, leading to less lending to private businesses. This phenomenon, known as crowding out, can hinder businesses' ability to expand operations, hire workers, invest in new technologies, and manage cash flow. The Kenya Bankers Association reported that between June 2024 and May 2026, bank investments in government securities surged by 58 per cent, while lending to the private sector grew by a mere 11 per cent.

This disparity raises concerns about limited credit access for businesses, which could slow economic growth, job creation, and tax revenue. The private sector, particularly manufacturers, is particularly vulnerable due to its heavy reliance on capital for factory expansion, machinery, energy, and raw materials. Stakeholders called for more affordable credit, stable taxes, affordable energy, and improved transparency in public debt management to support business growth and job creation.