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Mbadi: Debt has hit its peak but country needs to borrow more
National Treasury CS John Mbadi when he appeared before the Senate Finance and Budget Committee at the County Hall Nairobi on March 18, 2025.
The Treasury says the country's public debt is running a very expensive government despite the public debt hitting its peak.
Mr Mbadi said the country’s borrowing space is shrinking while demand for more resources both from the national and county governments is rising.
He told the National Assembly’s Budget and Appropriations Committee (BAC) that whereas the country’s debt is sustainable, the danger is the maturity of the debt.
“We have just hit a peak like Mt Kenya. We are at a point of maturing debt. Our debt maturity is at its peak,” Mr Mbadi said.
“Sometimes in 2014, some people sat somewhere and decided to borrow very expensive loans. Some of these people are now speaking like angels but I don’t want to blame them because some of us were in Parliament, made noise and never changed anything.”
Mr Mbadi did not name the individuals but was referring to the borrowings that were made during the construction of the Sh480 billion Standard Gauge Railway (SGR).
He said the Treasury requires Sh120 billion annually to repay the Chinese loans which must be paid between the months of January and March.
“These are very expensive loans that must be paid at once, both principal and interest which is problematic to us as the Treasury,” Mr Mbadi said.
“These loans were designed in a way that you cannot refinance it. You pay principal and interest at once.”
Mr Mbadi said the country will be required to pay syndicated loans between 2027 and 2034 with the first payment of $5.1 billion maturing in 2027.
The Treasury, he said, will also pay $200 million in 2028, $952 million in 2029 and a break in 2030 and 2031 before repayment resumes.
“I came to this office when the loans were hitting the roof. You put me at the peak of Mt Kenya when I do not know how to climb down,” Mr Mbadi told MPs.
Mr Mbadi said the Treasury is working to implement a fiscal consolidation plan targeting to reduce the fiscal deficit to 4.3 percent of the GDP in the financial year 2025/26.
“This is designed to slow down accumulation of public debt, improve primary surplus thereby achieve fiscal sustainability.
“We are consistently working to bring down the deficit so that we get out of the debt trap by taking cheaper debt to retire expensive debt.”
He said access to external concessional debt is shrinking and the Treasury is increasingly looking to access the domestic debt market at lower interest rates.
Mr Mbadi made the remarks at Trade Mark Suites in Kiambu when he appeared before the Budget and Appropriations Committee that is conducting public participation on the Division of Revenue Bill, 2025.
The Treasury, through the Bill, seeks to allocate the National Government Sh2.419 trillion and Sh405 billion to County Governments as sharable revenue raised nationally in the financial year 2025/26.
Mr Mbadi said the allocation to counties constitutes an additional Sh17 billion more than the Sh387.4 billion allocated in the current financial year. The Commission on Revenue Allocation (CRA) has proposed an allocation of Sh417.4 billion.
Appearing before the committee chaired by Alego Usonga MP Samuel Atandi, Mr Mbadi said the country is facing financial constraints due to limited access to finance in the domestic and international financial markets.
He said both the national and county governments are running top heavy executives that will not help the economy to grow.
“We are top heavy. There is a thinking that the government role is to employ people. We have a heavy presence of directors, deputy directors and administrative officers that do nothing,” Mr Mbadi said.
“You will find people hanging their coats in chairs and doing nothing from 8am to 5pm. In fact, there are many who have not gone to school but are holding directorship positions.”
Mr Mbadi said both the levels of governments run bloated executives.
“Kenyans wanted resources to be devolved to provide services at the local level. They were not looking for heavy government and display of opulence and flamboyance,” he said.
“If you see how the presidency is, it has been replicated in the 47 governors. Deputy governors say they have no work to do. It is only in Kenya where one is paid a salary for not working.”
The Bill seeks to divide shareable revenue raised nationally among national and county governments based on the third basis formula for sharing revenue approved by Parliament under Article 217 of the Constitution.