(NAIROBI, KENYA) – Kenyan banks are set to earn KES 341.8 billion ($2.36 billion / £1.85 billion) in interest payments from the government in the 2026/27 financial year, reflecting the heavy burden of domestic debt on public finances.
In total, local financial institutions will receive KES 500 billion ($3.45 billion / £2.7 billion) in interest on loans totalling KES 3.67 trillion ($25.3 billion / £19.8 billion). The payouts to local institutions will constitute 40% of all interest payments, which will hit KES 1.25 trillion ($8.62 billion / £6.76 billion) in the year to June 2027, according to National Treasury disclosures.
The National Treasury will pay KES 986.7 billion ($6.8 billion / £5.33 billion) to local lenders and KES 267.5 billion ($1.84 billion / £1.45 billion) to external lenders.
An analysis of current domestic debt holdings shows that major commercial banks will earn hundreds of billions from the interest payments. Kenya’s top five lenders held about KES 1.3 trillion ($8.97 billion / £7.03 billion) in treasury bonds and bills by March this year.
The heavy burden of domestic interest reflects high interest rates on the loans, as well as their large share of Kenya’s public debt.
About 56.3% (KES 7.3 trillion / $50.3 billion / £39.5 billion) of Kenya’s KES 13 trillion ($89.7 billion / £70.3 billion) public debt by the end of June was domestic debt. Debt from external lenders constituted 43.7% (KES 5.68 trillion / $39.2 billion / £30.7 billion).
By June 2026, local banks held KES 2.5 trillion ($17.2 billion / £13.5 billion) in treasury bills and bonds, making them the largest lender to the government. Other financial institutions had lent the government KES 1.13 trillion ($7.79 billion / £6.11 billion).
Holding half of the KES 7.3 trillion domestic debt by the end of June, these two categories of lenders are the biggest beneficiaries of interest payments scheduled for the current fiscal year.
Kenya Public Debt Interest Payments by Lender Category (FY 2026/27)
| Lender Category | Debt Held (KES) | Debt Held ($) | Projected Interest (KES) | Projected Interest ($) |
|---|---|---|---|---|
| Commercial Banks | 2.50 trillion | 17.24 billion | 341.80 billion | 2.36 billion |
| Other Financial Institutions | 1.13 trillion | 7.79 billion | – | – |
| Pension Funds | 1.03 trillion | 7.09 billion | 130.00 billion | 897.00 million |
| Insurance Companies | 1.00 trillion | 6.90 billion | 130.00 billion | 897.00 million |
| Government Agencies | 506.00 billion | 3.49 billion | 68.00 billion | 469.00 million |
| Households | 451.00 billion | 3.11 billion | 60.00 billion | 414.00 million |
| Total Domestic | 7.30 trillion | 50.34 billion | 986.70 billion | 6.81 billion |
Source: National Treasury Disclosures, Parliamentary Budget Office (PBO) Analysis.
Big banks have lent hundreds of billions of shillings to the government. Select five tier one banks held KES 1.29 trillion ($8.9 billion / £6.97 billion) in treasury bills and bonds by March, half of all lending by commercial banks to the government.
Equity Group held the highest amount at KES 353.7 billion ($2.44 billion / £1.91 billion), followed by KCB Group at KES 324.6 billion ($2.24 billion / £1.75 billion), Co-operative at KES 272.9 billion ($1.88 billion / £1.48 billion), NCBA at KES 216.6 billion ($1.49 billion / £1.17 billion) and Absa Group at KES 128.5 billion ($886 million / £694 million).
In an explainer for the 2026/27 budget, the Parliamentary Budget Office (PBO) said that during the year, interest on public debt will constitute about 42% of the KES 2.99 trillion ($20.6 billion / £16.2 billion) the government projects to collect from taxes and non-tax revenues.
“Consolidated Fund Service (CFS) expenditures show the heavy financial burden of public debt, with KES 1.25 trillion allocated for debt servicing, of which KES 986.73 billion is for internal debt, and KES 267.51 billion is for external debt,” said Dr Martin Masinde, the director of PBO.
Besides banks and other financial institutions, both pension funds and insurance companies are expected to pocket over KES 130 billion ($897 million / £703 million) each from interest payments. Government agencies will earn about KES 68 billion ($469 million / £368 million) and Kenyan households holding treasury bills and bonds will earn KES 60 billion ($414 million / £324 million).
This is based on a breakdown of the amount of treasury bills and bonds the different categories of domestic lenders held by the end of June, with a relative comparison to budgeted payments for the current fiscal year.
By end of June 2026, the stock of public debt owed to pension funds amounted to KES 1.028 trillion ($7.09 billion / £5.56 billion). Insurance firms were owed KES 1 trillion ($6.9 billion / £5.4 billion), government agencies were owed KES 506 billion ($3.49 billion / £2.74 billion) and households KES 451 billion ($3.11 billion / £2.44 billion).
The interest payments on domestic debt for the current financial year mark a 14% increase from the KES 862.65 billion ($5.95 billion / £4.66 billion) paid during the year to June 2026. Expenses are rising by KES 124 billion ($855 million / £670 million).
Overall, Treasury bond holders will earn the highest interest at KES 873.25 billion ($6.02 billion / £4.72 billion), representing 88.5% of all the domestic interest to be paid in the year to June 2027.
“Interest payments on treasury bonds amount to KES 873.25 billion, interest payments for treasury bills amount to KES 98.89 billion, interest payments for government overdraft facility amount to KES 11.18 billion, CBK Commission amounts to KES 3 billion and interest payment of pre-1997 government overdraft debt amounts to KES 408.86 million,” the PBO said.
The PBO warns that should the government opt to pay the interest and all debts maturing by June 2027, it could end up spending over 85% of the KES 2.99 trillion revenues on CFS alone.
The government has often resorted to rolling over maturing debts to reduce the debt service burden, with budgets focusing on servicing interest.
“Payments of redemptions on public debt for the FY 2026/27 amounts to KES 1.06 trillion. Therefore, if the government opts to liquidate all its maturing loans instead of rollover, the CFS expenditure obligations will amount to KES 2.56 trillion,” the PBO said.
Much of the maturing public debt during the current fiscal year constitutes internal debts of KES 648.78 billion ($4.47 billion / £3.51 billion), while external debts are KES 412.87 billion ($2.85 billion / £2.23 billion).
Treasury’s latest public debt bulletin shows that Kenya’s public debt stock stood at KES 13.013 trillion ($89.7 billion / £70.3 billion) by the end of June 2026, which was 68.5% of Gross Domestic Product (GDP).
In June alone, domestic debt grew by KES 89.4 billion ($617 million / £483 million) while the external debt increased by KES 27.4 billion ($189 million / £148 million).
“The stock of Treasury Bills increased by KES 11.24 billion from KES 1,106.91 billion as at end May 2026 to KES 1,118.15 billion as at end June 2026. The stock of Treasury Bonds increased by KES 76.70 billion from KES 5,944.45 billion to KES 6,021.15 billion over the same period,” Treasury stated.
Of the KES 7.3 trillion domestic debt by end of June, Treasury bonds accounted for KES 6 trillion and Treasury bills KES 1.12 trillion, the two major components.
On the external debt front, multilateral lenders such as the World Bank, the African Development Bank and the International Monetary Fund (IMF) have lent Kenya the most at KES 3.1 trillion ($21.4 billion / £16.8 billion), followed by commercial lenders at KES 1.5 trillion ($10.3 billion / £8.1 billion), and bilateral lenders at KES 973 billion ($6.71 billion / £5.26 billion).