World Bank Warns Kenya’s Debt at 69.9% of GDP Threatens Banks and Businesses

Kenya's public debt reached 69.9 per cent of Gross Domestic Product (GDP) by the end of June 2026. The World Bank says the country now relies heavily on borrowing from local lenders. 

It warns that this habit creates growing risks for both the government and the financial sector.

According to the report, domestic debt makes up 56.2 per cent of the total. Local borrowing has covered most of the budget deficit. Banks have responded by buying more government securities. 

The World Bank describes this close link between the state and banks as the sovereign-bank nexus.

That link carries a danger for private business. When banks lend heavily to the government, less money remains for companies. 

The World Bank calls this crowding out. Small and medium-sized enterprises may struggle to borrow for expansion, new equipment, or daily operations. Slower business growth could also mean fewer jobs.

The cost of repaying debt is rising too. Interest payments reached 5.8 per cent of GDP by June 2026. The World Bank says this heavy burden leaves little room in the budget. 

Money spent on interest cannot go to hospitals, schools, roads, security, or social protection. It also limits the government's ability to respond to sudden economic shocks without borrowing even more.

For ordinary Kenyans, the effects could reach far beyond government accounts. Businesses that depend on bank loans may face tougher competition for credit. 

Households may find it harder to borrow as well. Meanwhile, public services may suffer if interest costs keep rising.

The World Bank's message is clear. Kenya must manage its borrowing carefully. Debt at 69.9 per cent of GDP, a domestic share of 56.2 per cent, and interest costs of 5.8 per cent of GDP all point to mounting pressure on the country's finances and banks.