The rising public debt is a huge burden for the taxpayers but a boon for commercial banks and other financial institutions. They are raking in billions in guaranteed interest payments from the revenue being squeezed out of taxpayers.
As the debt surpasses Sh13 trillion, the private financial institutions are raking in billions in interest. The banks are, for instance, going to pocket Sh342 billion in the 2026/2027 financial year. Other financial institutions, pension funds and insurance companies are expected to pocket Sh130 billion each from interest payments.
The high debt repayment uses up the resources needed to pay for basic services such as healthcare and education and the construction of infrastructure to boost national development.
Nearly 60 per cent to 70 per cent of government revenue goes to servicing the domestic and external debt. Local financial institutions will be paid Sh500 billion to cover interest on loans totalling Sh3.67 trillion in the 2026/2027 financial year.
This will constitute 40 per cent of all interest payments, which, the National Treasury says, will hit Sh1.25 trillion in the current financial year - Sh986.73 billion for internal debt and Sh267.51 billion to service external borrowing.
The increased debt means misery for taxpayers, as the government is forced to aggressively expand tax measures to meet tight debt obligations.
As banks pocket hundreds of billions of shillings in risk-free interest from Treasury bonds and bills, businesses are being crowded out. The key attraction is lending to the safe, high-yielding government rather than riskier private businesses and citizens.
The Parliamentary Budget Office says that during the 2026/2027 financial year, interest on public debt will constitute about 42 per cent of the Sh2.99 trillion the government projects to collect from taxes and non-tax revenue.