By January 2024, Kenya's public debt had shifted towards external sources, with external debt surpassing domestic debt by over Sh1 trillion. This shift was driven by a combination of factors, including a weak shilling and increased foreign borrowing.
As of January, Kenya's external debt stood at Sh6.189 trillion, accounting for 55% of the total debt stock. In contrast, domestic debt amounted to Sh5.058 trillion, representing 45% of the total. This imbalance was largely due to the depreciation of the shilling against major foreign currencies, which increased the value of external debt in shilling terms.
The surge in external debt was also fueled by increased borrowing from foreign sources. Between May 2023 and January 2024, external debt's share of Kenya's public debt stock consistently increased, reaching 55% by January. This trend was driven by the government's need to finance its budget deficit and repay maturing external debts.
However, the recent appreciation of the shilling against major foreign currencies has slowed the surge in external debt. Since February 2024, the shilling has gained significant value, reducing the value of external debt in shilling terms. This trend could lead to a more balanced distribution of domestic and external debt in the future.