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Kenya’s Rising Borrowing Costs: A New Squeeze on Growth and Credit

  • Writer: Derry Thornalley
    Derry Thornalley
  • Sep 24
  • 2 min read

Kenya’s economy has weathered many storms — from droughts to debt rollovers — but a new challenge is tightening its grip: the rising cost of financing across every layer of the economy.


According to a recent Moody’s report, sovereigns, banks, and corporates in Kenya are all paying significantly more to access credit than they did just five years ago. The trend is not unique to Kenya — Nigeria and South Africa face the same squeeze — but its impact here is particularly sharp given Kenya’s already heavy repayment schedule.


Sovereign Debt Under Pressure

Kenya’s government is carrying one of the region’s largest debt loads, with debt-to-GDP standing at around 58%, though the Treasury is targeting a gradual decline to 52.8% by 2027/28. The problem is the cost of servicing that debt. As global interest rates remain high and domestic liquidity tightens, the price of rolling over maturities has spiked.


This leaves less fiscal space for the very things Kenyans feel every day: infrastructure investment, subsidies, and essential public services.


Banks and Corporates Feeling the Heat

It’s not just the state. Kenyan banks and corporates are also squeezed. With sovereign borrowing crowding local markets, lenders face higher funding costs. That translates into tighter margins and more expensive loans for businesses and households.


The knock-on effect is slower private-sector growth. SMEs — the backbone of Kenya’s job creation — are particularly vulnerable, as higher borrowing costs limit their ability to expand or even sustain operations.


The IMF Backdrop

Kenya is due to host IMF discussions later this year on fresh programme support. These talks will be closely watched, because credible fiscal reforms are seen as essential to easing investor concerns. Without them, the cost of financing could remain high for years, undermining growth prospects.


The Bigger Picture

Kenya’s story is part of a wider African challenge: how to maintain access to affordable finance in an era of global tightening. For Kenya, the answer lies in credible fiscal discipline, domestic capital market deepening, and policies that build investor confidence.


The stakes are high. If Kenya manages this transition well, it can unlock growth and investment even under tougher conditions. If not, the cost of money could become the country’s greatest drag on development.

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