Summary

Kenya’s domestic debt landscape has undergone a tectonic shift over the last quarter-century. Data from the Central Bank of Kenya reveals that total domestic debt has surged from approximately Ksh 183.4 billion in 1999 to a staggering Ksh 6.2 trillion by May 2025. This expansion is not just a story of increasing volume but one of structural transformation. Treasury Bonds have evolved from a secondary borrowing tool into the primary backbone of the state’s internal financing, now accounting for over 80% of the total domestic debt portfolio. This article analyzes the transition from short-term bills to long-dated bonds and evaluates what this “maturity lengthening” means for Kenya’s debt sustainability in a high-interest environment.

Inside the Trends: Decoding 25 Years of Borrowing

The dataset provides a clear visual narrative of how the Kenyan government has professionalized its internal borrowing strategy:

1. The Great Rebalancing: From Bills to Bonds

In September 1999, the government relied heavily on short-term liquidity. Treasury Bills (Ksh 115 billion) were the dominant instrument, representing nearly four times the volume of Treasury Bonds (Ksh 27.8 billion).

• Inference: By May 2025, the script has flipped. Treasury Bonds have ballooned to Ksh 5.03 trillion, while Treasury Bills stand at Ksh 979 billion. This deliberate shift toward bonds indicates a strategy to reduce “refinancing risk”—the danger of having to pay back large amounts of debt in a very short window.

2. The Death of “Government Stocks”

The data shows the gradual phasing out of traditional Government Stocks. In the early 2000s, these accounted for a small but consistent portion of debt (~Ksh 3 billion).

• Inference: By the mid-2020s, these have dropped to zero. The government has modernized its debt instruments, favoring the liquidity and secondary market trading of modern Treasury Bonds over older, static debt instruments.

3. The Central Bank Overdraft: The “Last Resort” Buffer

The “Overdraft at Central Bank” column shows significant monthly fluctuations, currently sitting at Ksh 94.9 billion (May 2025).

• Inference: Compared to the trillions in bonds, the overdraft remains a relatively small “emergency valve.” Its continued presence highlights the government’s periodic need for immediate cash flow to meet short-term obligations before taxes or auction proceeds are collected.

Kenya Domestic Debt by Instrument