Kenya Cuts U.S. Debt by Half Amid Shift to Cheaper Loans

Kenya has reduced its bilateral debt to the United States by more than half within a year, according to new data from the National Treasury, as the government seeks to lower borrowing costs and strengthen its debt profile.

Treasury figures for the period ending December 2025 show Kenya’s debt to the United States fell from KSh32.13 billion (about $248 million) in December 2024 to KSh15.97 billion (around $123 million) a year later, representing a decline of about 50 percent.

Officials say the reduction forms part of a broader fiscal strategy aimed at reducing reliance on costly bilateral and commercial loans while shifting toward concessional financing from multilateral lenders.

The drop was largely driven by accelerated repayments of maturing bilateral loans as the government attempts to ease the country’s growing debt-servicing burden.

Under Treasury Cabinet Secretary John Mbadi, Kenya has increasingly sought funding from multilateral institutions such as the International Monetary Fund and the World Bank.

Multilateral loans now account for more than 56 percent of Kenya’s external debt, offering longer repayment periods and relatively lower interest rates than bilateral or commercial borrowing.

Analysts also attribute the decline partly to relative stability in the Kenyan shilling during 2024 and early 2025, which helped limit the rise in the local currency cost of servicing dollar-denominated loans.

Despite the reduction in debt owed to the United States, Kenya’s overall public debt continued to grow. Treasury data shows total public debt reached about KSh12.3 trillion by the end of 2025.

However, the bilateral debt component – loans owed directly to foreign governments – declined slightly from KSh1.03 trillion to KSh998 billion, with the United States accounting for one of the largest reductions.

Kenya’s debt management efforts have also been reflected in international credit assessments. In August 2025, S&P Global Ratings upgraded the country’s long-term sovereign credit rating to “B” from “B-”, citing reduced short-term liquidity risks and improved debt management.

Officials say the shift toward concessional financing could also reduce Kenya’s vulnerability to economic or political shifts among individual bilateral lenders while giving the government greater flexibility in managing its external obligations.