Nairobi, Kenya: Consider a scenario where, after years of diligently saving and investing your hard-earned money in what you believed to be the most secure option like the government bonds, you are suddenly informed by the government: “While we acknowledge we owe your debt of 100, we are now only able to repay 70.”

Ndindi Nyoro, the Member of Parliament for Kiharu Constituency, has issued a stark warning, drawing parallels between Kenya’s current debt situation and Ghana’s recent economic crisis. 

Nyoro vividly described the painful reality of a “haircut,” an economic term for a significant reduction in savings, as experienced by Ghanaian pensioners and ordinary citizens who woke up to find a large portion of their life savings wiped away. He presented Ghana’s crisis as a cautionary tale for Kenya, emphasizing that such a scenario is not a theoretical possibility but a proven, devastating reality.

“What we need to do is take some of the people from the National Treasury in Kenya for a benchmarking trip to Ghana,” Nyoro said. 

Adding “Let them sit with a pensioner who bought government instruments, only to be told: I know I owe you 100 million, but from today, I can only give you 70 million. That’s what we call a haircut and if Kenya reaches that point, it will be catastrophic.”

Nyoro was speaking at the Institute of Public Finance (IPF) Mid-Year Review on Kenya’s Public Debt Overshoot, a forum that brings together economists, policymakers, and civil society to track the country’s fiscal health.

The report presented at the forum paints a worrying picture. Kenya’s public debt has now hit KSh 12.4 trillion. In just one year, the government borrowed KSh 1.25 trillion, overshooting the legal target of KSh 1 trillion. 

That means Kenya is borrowing KSh 100 billion every month, about KSh 3.5 billion every day, or KSh 140 million every hour. 

The report warns that this pace of borrowing is unsustainable. More worrying is that while the government borrows more, money is not flowing into households and businesses. Instead, credit to the private sector is shrinking, leaving entrepreneurs starved of capital.

At the same time, Kenya’s economy is slowing compared to its neighbors. In 2024, Kenya grew by 4.7%, while Rwanda posted 8.9%, Uganda 6.1%, and Tanzania 5.5%. For a country long considered East Africa’s economic engine, coming last is a red flag. 

The report also highlighted how vital systems, including the State Health Accounts (SHA), are failing to channel resources effectively, pointing to deeper weaknesses in public financial management.

James Muraguri, CEO of the Institute of Public Finance, stressed that Kenya cannot afford to ignore these signals. 

“The numbers tell us the truth without stronger fiscal discipline and better accountability systems, the debt burden will only deepen, leaving little room to fund essential services,” he said.

Nyoro echoed these concerns with political bluntness “If we do not sober up as a country, the economy will force us to sober up. And the consequences will be dire,” he warned.

For him, the heart of the problem lies in how politics and policy shape economics. In his words, advanced societies demand greater accountability, and without sound policy choices, no amount of political narrative can shield a country from reality.

Nyoro explained that Kenya’s current monetary policy lowering interest rates helps the government manage its debt but not the people. Instead of easing credit for businesses, it simply makes government borrowing cheaper. 

Meanwhile, sectors like infrastructure are increasingly being financed through securitization using fuel levies and other revenue streams as collateral piling hidden risks on top of existing loans. 

As Nyoro explained: “Picture this: you run a hardware shop in Kakamega and take a loan from Bank A, which you’re supposed to repay using your shop profits. Then you go to Bank B and tell them, I will use the revenue from my cement and steel sales to repay this second loan. You cannot say that this will not affect your first loan. That is exactly what Kenya is doing with fuel levies and other revenues. We are stacking obligations on top of each other, and it all adds to our debt.”

He also challenged the popular claim that Kenya borrows for development. “Every road you see under construction is not part of the national debt. Those are tied to securitization of the fuel levy. Let no one tell you otherwise,” he said, calling for transparency.

Kenya’s challenges mirror a continental trend. Zambia defaulted on its debt. Ethiopia is battling inflation and forex shortages. Nigeria is straining under subsidy costs. And Ghana, once celebrated for its reforms, is now the poster child of how quickly debt distress can unravel years of progress. 

The Pan-African lesson is simple: when governments overspend and overborrow, it is ordinary citizens who pay the price. Savings are wiped out, taxes rise, services are cut, and social unrest follows.

The report makes clear recommendations for Kenya: stick to austerity pledges and cut overspending, clear pending bills to release funds into the private sector, reform revenue collection to make taxes fairer and more sustainable, and avoid backdoor borrowing through excessive supplementary budgets.

Nyoro insisted that this is the moment for Kenya to act, describing the current global environment as an “economic summer.” With lending rates easing and relative global stability, countries have a window to reset their economies.

But as he cautioned, summer does not last forever. If wasted, Kenya could find itself forced into the kind of painful adjustments that humbled Ghana.

The choice before Kenya is stark: act now with fiscal discipline, or wait to be forced into reforms later. And as Ghana’s pensioners know too well, those adjustments do not come cheap.