Appearing before the National Assembly’s Committee on Public Debt and Privatization at Bunge Tower on Monday, March 30, 2026, Nyakang’o painted a troubling picture of the country’s fiscal health.
She cautioned that persistent borrowing, coupled with weak project coordination, is eroding Kenya’s financial stability and limiting its ability to effectively implement budgets.
According to her presentation, Kenya’s public debt had risen to Ksh12.29 trillion as of December 2025—equivalent to 67.8 percent of Gross Domestic Product (GDP). This figure significantly exceeds the legally recommended threshold of 55 percent, raising concerns about long-term sustainability.
A key issue highlighted by Nyakang’o is the rising cost of servicing debt, with a large share of repayments going toward interest rather than reducing the principal amount. She revealed that interest payments alone account for over half of total debt servicing, amounting to approximately Ksh464.49 billion.
“Half of debt payments are purely financial costs rather than actual reduction of the loan. The principal remains largely unchanged,” she told lawmakers, underscoring the strain this places on public finances.
The Controller of Budget further disclosed that the government frequently resorts to new borrowing to meet existing debt obligations—a practice that risks trapping the country in a cycle of dependency. In some cases, domestic borrowing is used to settle external loans, highlighting the extent of fiscal pressure.
Her remarks drew concern from members of the committee, chaired by Mbalambala MP Shurie Abdi Omar, who questioned the efficiency of current debt management strategies.
Nyakang’o also flagged significant losses linked to commitment fees on unutilised loans. These fees are incurred when borrowed funds remain unused due to delays in project implementation, often caused by inadequate planning and coordination between the National Treasury and executing agencies.
She cited stalled or slow-moving projects such as Konza Technopolis and certain Kenya Power initiatives dating back to 2017 as examples of inefficiencies that have contributed to financial wastage.
“We find ourselves signing for loans before projects are ready. Funds are mobilised without ensuring implementers are prepared,” she said.
The mounting debt burden has also triggered a liquidity crunch within government operations. Nyakang’o revealed that cash flow challenges have forced authorities to ration funds, leading to delays in critical payments, including salaries.
“We are seeing instances where even salaries are paid in instalments due to limited cash availability,” she noted.
Additionally, the Controller of Budget raised concerns over the use of Article 223 of the Constitution to authorise spending that had previously been rejected by Parliament. She warned that this practice creates a loophole that undermines fiscal discipline and weakens oversight.
To address the crisis, Nyakang’o called for a shift toward concessional borrowing, improved transparency in debt management, and stronger institutional oversight. She emphasized the need for evidence-based decision-making before acquiring new loans to ensure they deliver value to the economy.
0 Comments