The Debt Did Not Disappear

Ruto’s defence of his record is straightforward. He says Kenya’s public debt rose from about KSh10.3 trillion when he took office in 2022 to roughly KSh13 trillion, an increase of about 27%. He contrasts that with the much faster multiplication of debt under previous administrations and says his government has therefore slowed the old borrowing trajectory.

He also says the debt-to-GDP ratio has declined from around 72% to 68% and should eventually move toward the statutory 55% threshold. These are the President’s figures and political framing. They are relevant because they show how the government wants its fiscal record to be judged, but they are not by themselves an independent assessment of sustainability.

The more important shift is in the financing model Ruto says should come next. The proposed National Infrastructure Fund is intended to bring pension funds, development-finance institutions and private investors into commercially viable infrastructure projects, reducing the need for every road, railway, water system or housing development to appear as ordinary sovereign borrowing.

There is sound logic in that approach. Productive assets do not have to be financed exclusively through taxes or conventional public debt. But changing the financing structure does not eliminate the economic bill. It changes who pays first, who earns a return, what assets or revenues support the project and who carries the loss if expectations fail.

That is where Kenya’s debt debate becomes more sophisticated: not only how much the state owes today, but which obligations could become public tomorrow.

Treasury has already raised KSh406 billion in net domestic borrowing in July and August, equivalent to 41.11% of its full-year domestic target of KSh987.4 billion. The pace was helped by a highly liquid market and an August infrastructure bond that attracted bids worth KSh460.4 billion, of which about KSh312 billion was accepted.

That is useful for government. Raising money early can reduce refinancing pressure later in the fiscal year, and strong demand shows that Kenya can currently mobilise substantial domestic funding.

But strong demand for government securities should not automatically be read as a verdict that Kenya’s debt path is safe. Investors can be drawn by liquidity, yields, tax treatment and the relative attractiveness of government paper. Market appetite answers the question of whether Treasury can borrow now; it does not settle how easily the debt can be serviced later.

There is also a wider economic question. When government absorbs large amounts of domestic capital, the effect on credit for businesses matters. Kenya’s Central Bank Rate was 8.75% on 28 August, while the average commercial lending rate was still 14.38% in June. The exchange rate was relatively stable at KSh129.46 per US dollar and KSh150.75 per euro, and July inflation stood at 6.49%.

Those indicators do not point to immediate financial panic. They point to a more ordinary but consequential tension: fiscal stability matters, but so does the price and availability of capital for the rest of the economy.

Public debt is usually imagined as a single number. In practice, the boundaries matter.

If government borrows directly, the obligation is visible in the sovereign debt stock. If a private investor finances a toll road, the debt may sit elsewhere. But if government guarantees minimum revenue, commits future taxes or levies, pledges public assets, agrees to compensation clauses or ultimately has to rescue a failed project, some of the risk can migrate back to taxpayers.

Economists call some of these exposures contingent liabilities: obligations that do not necessarily require payment today but can become real if specified events occur. Public-private partnerships can therefore be useful without being fiscally invisible.

The same issue arises when future public revenues are securitised. A financing vehicle may not look identical to an ordinary Treasury bond, but using tomorrow’s revenue to raise money today still creates an economic commitment.

This is why the argument cannot be resolved simply by asking whether an obligation appears in one headline debt figure. The more useful question is whether citizens, Parliament and oversight institutions can see the full architecture of risk.

The government is increasingly defending its economic record through visible delivery: roads, housing, markets, classrooms, water projects and jobs. Affordable housing is one of the clearest examples.

On 29 August, Ruto argued that abolishing the Affordable Housing Programme would endanger livelihoods for 1.1 million young Kenyans. That figure is a presidential claim and should not be treated as an independently verified employment count. It includes the wider construction and supply chain, not only workers directly employed on housing sites.

There is a useful reality check in the housing data. KNBS figures reported by The Star show that the State Department for Housing and Urban Development completed 6,738 units in 2025, up sharply from 1,655 in 2024 but still far below the original pledge of 250,000 homes a year. By August 2026, government officials were pointing instead to a much larger pipeline of units under construction.

Both pictures can be true at once: a rapidly expanding construction programme can support substantial economic activity while completed output remains far below the original annual target.

That distinction matters politically. Governments naturally prefer measures that capture scale and momentum. Voters also care about completion, durability and whether claimed jobs become stable incomes. As 2027 approaches, the argument will increasingly be about how to interpret the same record.

Last week’s dispute over the Kenya Revenue Authority’s higher customs benchmark for consolidated cargo was not a national revolt, and it should not be inflated into one. But it illustrated how fiscal decisions are now interpreted in a more suspicious political environment.

KRA says the revised minimum yield of KSh3.2 million, up from KSh2.5 million, is intended to curb undervaluation while preserving consolidated cargo as an option for small traders. Traders say the change threatens narrow margins and that consultation did not amount to consent.

The specific dispute matters less here than the broader pattern. Since the 2024 Finance Bill protests, taxation, borrowing and public spending are increasingly treated by citizens as connected questions.

If government says conventional debt growth is slowing, people ask why revenue pressure remains intense. If infrastructure is financed through private capital, people ask what has been promised in return. If a public asset supports a financing vehicle, people ask who controls it and what happens if the project underperforms.

This scrutiny can become conspiratorial when evidence is thin. But the democratic instinct behind it is legitimate: fiscal transparency is part of political trust.

Employment claims are increasingly attached to flagship programmes because jobs are among the most politically powerful forms of evidence a government can present.

But yesterday’s labour-market question applies here too. A temporary construction job, a subcontract, an apprenticeship and a permanent salaried position are all employment, yet they offer very different security.

This is why the 1.1 million housing-jobs claim is politically important even when its methodology is not independently verifiable. It shows what the government believes voters want to hear: not simply how much money was spent, but how many livelihoods were created.

The stronger benchmark is harder. How long do the jobs last? What do they pay? What skills do workers retain when construction ends? Do subcontractors grow into durable businesses? Can workers build assets of their own?

Before 2027, large employment numbers will be common. Independent measures of job quality, duration and additionality will be much rarer — and much more useful.

The easy debate asks whether debt is good or bad. That is not a useful way to judge a country that still has large infrastructure gaps and a young, growing population.

The better questions are what Kenya finances, what economic return those assets produce, what risks the state accepts, how obligations are recorded and whether future taxpayers can understand the commitments being made on their behalf.

Ruto is right about one principle: Kenya cannot develop simply by refusing to invest. Critics are right about another: moving infrastructure outside conventional sovereign borrowing does not automatically remove public risk.

Transparency is therefore the bridge between those positions.

If private capital finances a motorway, railway, water system or housing project, the public should be able to understand the revenue model, ownership structure, guarantees, termination clauses and eventual exposure of the state. If future revenues are committed, that commitment should be visible. If risks are genuinely private, that should be clear too.

Kenya does not need less ambition. It needs financing architecture sophisticated enough to support ambition without making tomorrow’s liabilities difficult to see.

That is fiscal policy. It is also democratic accountability.

Kenya’s financing experiment matters far beyond Nairobi. European development banks, institutional investors, pension-linked capital and private infrastructure companies are precisely the kinds of actors the government hopes to attract.

That creates opportunity. It also creates responsibility.

Well-designed infrastructure finance can bring capital, expertise and long-term investment into projects that government would struggle to fund directly. Poorly designed structures can hide risk, socialise losses or lock future governments into expensive commitments.

For European partners, due diligence therefore has to extend beyond whether a project is bankable. It should include public disclosure, procurement integrity, allocation of risk, affordability and the treatment of contingent liabilities.

Kenya is not merely asking outsiders to fund projects. It is attempting to redesign how a large regional economy mobilises public and private capital. The credibility of that model will depend less on clever financial labels than on institutions strong enough to make the obligations visible.

National Infrastructure Fund: Governance rules, disclosure requirements, asset treatment and the handling of contingent liabilities will determine whether the new model reduces fiscal pressure or merely makes some obligations harder to see.

Domestic borrowing: Treasury has already completed more than 41% of its annual net domestic borrowing target. Watch whether this remains deliberate front-loading or whether supplementary budgets push the target higher, as has happened in recent years.

Debt composition and service: The most useful indicators will be debt-service costs, maturity structure, domestic versus external exposure and the relationship between debt growth and economic growth — not the headline stock alone.

Housing and jobs: As government ties increasingly large employment figures to flagship programmes, independent evidence on job duration, incomes and completed output will matter more.

Public trust: Tax and financing disputes will remain politically sensitive because citizens increasingly connect revenue collection with the visibility and credibility of public spending.