Mbadi and CBK Governor Face MPs as Debt Servicing Threatens to Consume 91% of Kenya’s Revenue

Members of Parliament (MPs) have raised concern over Kenya’s rising debt burden after the Central Bank of Kenya (CBK) Governor Kamau Thugge and Treasury Cabinet Secretary John Mbadi appeared before the National Assembly’s Public Debt and Privatization Committee.

The committee questioned the government’s borrowing plans and warned that heavy domestic borrowing could hurt the economy and reduce opportunities for private businesses to access credit.

The session, chaired by Balambala MP Shurie Abdi, focused on Kenya’s growing public debt and the country’s fiscal position.

Thugge told lawmakers that Kenya’s economic growth forecast for the 2026/2027 financial year had been reduced from 5.5 % to 5 % due to global economic shocks linked to the conflict in the Middle East.

Despite the downgrade, the CBK Governor said agriculture and construction sectors were helping stabilize the economy.

However, MPs questioned the government’s plan to finance a projected budget deficit of nearly Ksh 1 trillion mainly through domestic borrowing.

“We need to sit down and have a look at our facts, not trying to smooth things and make things look good on paper. In reality, we all know it’s not the best thing. It will come to bite us at one time,” said Committee Chairperson Shurie Abdi.

Irene Mrembo warned that supplementary budgets could increase domestic borrowing beyond the current target.

Debt Servicing Takes Huge Share of Revenue

Treasury CS John Mbadi painted a grim picture of the country’s finances, revealing that debt servicing is expected to consume 91% of ordinary government revenue in the 2026/2027 financial year.

According to the CS, the government will require Ksh 2.56 trillion for Consolidated Fund Services, including domestic interest payments and debt redemptions.

“We have been shifting resources from development in this country to servicing debt,” he told the committee.

He added that development spending has continued to decline over the years due to expensive commercial loans and rising debt obligations.

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MPs Question Over Domestic Borrowing

Wajir East MP Aden Daudi questioned why the government had shifted heavily from external borrowing to domestic borrowing.

Lawmakers also challenged the Government-to-Government oil import deal, with Obadiah Barango calling for a return to a free market system.

“Why can’t we drop this G2G so that we can let the free market resume?” asked Barango.

Thugge defended the government’s debt management strategy, saying refinancing efforts had helped Kenya avoid default risks and protected the exchange rate.

“By removing the risk of default or refinancing pressure, that has a positive impact on the exchange rate,” he said.

The CBK Governor further disclosed that Kenya’s net debt-to-GDP ratio currently stands at about 64 %, above the government’s target of 55%.

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Calls for National Debate

Mbadi also called for a national conversation on the cost of governance, saying the country’s governance structure remains expensive.

“We have a very expensive Constitution, we have 47 county governments, and another government at the national level. It is high time that we discussed it,” he said.

The Treasury projects a fiscal deficit of Ksh 1.111 trillion, equivalent to 5.3% of Kenya’s GDP, with most of the financing expected to come from domestic borrowing.

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MPs during a Retreat to assess the Progress and plan for 2026 Legislative Agenda. PHOTO/PoK