Dimming oil prospects, slower economic growth and the controversy over Eurobond proceeds means Kenya will pay a higher premium if it goes back to the international markets for funds.
The government expects to plug a Sh600 billion budget deficit with Sh340 billion of the money targeting external financiers.
National Treasury Cabinet Secretary Henry Rotich has indicated that Kenya is likely to go for a Eurobond type of loan to finance this deficit.
Kenya borrowed a Sh60 billion syndicated loan on October 29 from commercial banks with Citi, Standard Bank and Standard Chartered Bank as book-runners.
INVESTORS NO LONGER UPBEAT
According to Africa Global Research Standard Chartered Chief Economist Razia Khan, investors are no longer upbeat on the Kenyan story, which saw them lend cheaply back in 2014.
"Investors are complacent with the Kenyan story because they were expecting Kenya would become an oil producer in the near future but that is now unlikely," Ms Khan said in Nairobi on Wednesday.
She said the country's exports are not growing as a percentage to debt, which would pile pressure on its borrowing position.
Brent Crude prices have fallen to their lowest levels since late 2003 to below $30 a barrel, which means Kenya is unlikely to exploit its oil reserves to boost export earnings in the near future.
In 2014, the country issued a total of $2 billion with a weighted average interest rate of 6.6 per cent from Europe, Middle East and the US.
According to Bloomberg Markets, the return on the country's $2 billion bond, trading on the Irish stock market, climbed 124 basis points in just a month to 9.23 per cent in December.
While this does not affect the rate at which Kenya services the debt, it means it cannot issue a new Eurobond at a rate less than 9 per cent at the current market position.
The market also became more risk averse when the US Federal Reserve Bank raised interest rates for the first time in a decade and is expected to tighten policy further this year.
There is also concern over the Chinese economy, which has slowed down with GDP growing at 6.9 per cent, the slowest in 25 years.
China trade with Africa had grown to over $22.1 billion by 2014 and the current turmoil may affect growth in Africa.
Although Kenya exports just 1 per cent to China, meaning it is unlikely to be affected by the slowdown, it experienced the huge spread even larger than Nigeria, which is wholly reliant on oil.
According to investment bank Exotix in an outlook report for 2016, Kenya's Eurobond prospects suffered because the country spent much of 2015 stumbling from one small crisis to the next, making it very difficult for investors to get comfortable with what would otherwise be one of Africa's best underlying stories.
They say "investors are more sensitive to negative headlines and policy weaknesses than before."
Treasury Permanent Secretary Kamau Thugge said politicians "misreading" the Treasury's accounts were hurting efforts to raise more debt on international markets even as the government had factored in external commercial borrowing every year so as not to crowd out the private sector from the domestic debt market.