Word Bank backs infrastructure fund to help Kenya ease debt pressure

Kenya's public debt poses a significant burden, with the World Bank warning that high debt levels could hinder the country's economic growth. The nation's public debt reached 70% of GDP at the end of the 2025/26 fiscal year, with domestic borrowing accounting for 56.2% of the total debt. The rising domestic borrowing has deepened sovereign-bank linkages, raised refinancing risks, increased interest costs, and constrained credit availability to the private sector, according to the World Bank's 34th edition of the Kenya Economic Update.

The Central Bank of Kenya reported that by August 2025, the total public debt had climbed to Ksh 13.5 trillion, with domestic debt contributing Ksh 7.7 trillion and external debt at Ksh 5.8 trillion. Dr Qimiao Fan, World Bank Division Director, noted that interest payments have absorbed about one-third of government revenue, leaving less resources for essential services and development priorities.

To address this issue, the World Bank advises Kenyan authorities to allocate a portion of the National Infrastructure Fund (NIF) proceeds to retire high-cost debt. The government has been pursuing privatization and divestiture programs to generate funds for infrastructure projects, with the NIF currently capitalised at Ksh 103.5 billion and expected to receive an additional Ksh 204 billion from the sale of shares in Safaricom.

By redirecting privatization revenues toward debt reduction, Kenya could improve its debt sustainability, lower interest costs, and lessen the risk of refinancing.