Nairobi — Kenya remains at a heightened risk of debt distress, despite the government's successful sale of a $2 billion Eurobond last year, according to a new report from the Institute of Public Finance (IPF).
In its 2025 Macro Fiscal Analysis Snapshot (MFAS), IPF sounded the alarm over the country's fiscal health, stating that Kenya has surpassed all of the International Monetary Fund's (IMF) debt sustainability thresholds.
These thresholds set by the Bretton Woods organization; which are key indicators of a country's ability to manage its debt, include the debt-to-GDP ratio, the debt service-to-revenue ratio, and the external debt service-to-exports ratio.
IPF's senior research analyst Bernard Njiiri highlighted that Kenya's debt ratios have now breached these critical IMF parameters, raising concerns that any economic shocks could severely impede the nation's growth.
"As we speak, Kenya has breached all these parameters set by the IMF. Any shocks on the economy could have far-reaching effects that hamper economic growth," he said.
The report further cautioned that any additional economic setbacks, such as reduced growth or an increase in borrowing costs, would place significant pressure on the country's already strained fiscal buffers.
IPF stressed the need for the government to exercise greater fiscal restraint, particularly by scaling down on borrowing and reducing taxation, to rebuild fiscal buffers and bolster foreign exchange reserves, which have not fully recovered from previous challenges.
The warning comes amid heightened scrutiny of the government's fiscal policies.
Last week, economist Ashish Chadda raised concerns over the Treasury's Budget Policy Statement for the fiscal years 2025/26 to 2027/28.
Chadda criticized the proposed budget's planned increase in government expenditure, which is set to rise by over Sh1 trillion from 2023 to 2026.
He also expressed doubts about the sustainability of the anticipated revenue increase, much of which is expected to come from new tax measures.
Chadda warned that these new taxes could place further strain on an already burdened population.
