Public vs Private
Kenya’s borrowing decisions in 2025 are guided by a strategic framework designed to balance cost, risk, and sustainability. The government doesn’t just borrow randomly—it follows a structured plan known as the Medium-Term Debt Management Strategy (MTDS), which outlines how much to borrow, from which sources, and under what terms.
This article breaks down how Kenya chooses between public (concessional/multilateral) and private (commercial/bilateral) loans, and what influences those decisions.
1. Why Kenya Borrows
According to the MTDS, Kenya borrows to:
- Finance fiscal deficits (when spending exceeds revenue)
- Refinance maturing debt
- Manage cash flow and emergencies
- Support development goals like infrastructure, health, and education
2. Public (Concessional) Loans
These are loans from multilateral institutions like:
- World Bank
- IMF
- African Development Bank (AfDB)
- International Fund for Agricultural Development (IFAD)
Features:
- Low interest rates (often below 4%)
- Long repayment periods (up to 30 years)
- Grace periods before repayment begins
- Strict conditions on how funds are used
Why Kenya Chooses Them:
- Lower cost of borrowing
- Predictable repayment schedules
- Support for social sectors and reforms
3. Private (Commercial & Bilateral) Loans
These include:
- Eurobonds
- Loans from commercial banks
- Bilateral deals with countries like China, France, Japan, and Saudi Arabia
Features:
- Higher interest rates (6–9% or more)
- Shorter repayment periods
- Less oversight compared to multilateral loans
Why Kenya Chooses Them:
- Faster access to funds
- Fewer conditions
- Useful for urgent infrastructure or refinancing needs
4. Kenya’s 2025 Borrowing Mix
| Source Type | Planned Share of Borrowing |
|---|---|
| Domestic | 75% |
| External | 25% |
External Breakdown:
- Multilateral (e.g. World Bank) – 53.9%
- Bilateral (e.g. France, China) – 21.4%
- Commercial (e.g. Eurobonds) – 24.7%
This mix helps Kenya reduce exposure to currency fluctuations and manage repayment risks.
5. Factors That Influence Borrowing Choices
- Interest Rates: Kenya prefers concessional loans when global rates are high.
- Currency Risk: External loans in USD or EUR can become expensive if the shilling weakens.
- Debt Maturity: Longer-term loans reduce pressure on short-term repayments.
- Market Access: If external markets tighten, Kenya shifts toward domestic borrowing.
- Project Type: Social programs often use concessional loans; infrastructure may use commercial loans.
6. Recent Trends and Adjustments
- In FY 2023/24, Kenya aimed for a 50:50 domestic-external mix but ended up with 72% domestic borrowing due to limited access to external financing.
- In 2024, Kenya successfully refinanced $1.5B of its Eurobond, reducing pressure on reserves.
- The government is now prioritizing long-term debt, Diaspora Bonds, and ESG-linked instruments to diversify sources.
Final Thoughts
Kenya’s borrowing strategy in 2025 is a balancing act—between affordability, risk, and development needs. By choosing a mix of public and private loans, the government aims to fund national priorities while keeping debt sustainable. But with debt-to-GDP still above the legal threshold, every borrowing decision counts.
