The International Monetary Fund (IMF) has raised concerns over rising borrowing costs for African governments, warning that higher global interest rates could make it more expensive for countries to raise funds from international financial markets, even as access to investors improves.
Zeine Zeidane, Director of the IMF’s African Department, said African countries had made progress in reducing the additional interest rates investors demand to compensate for the risks of lending to them. However, rising global benchmark rates are offsetting some of those gains.
“Market access remains favourable for African economies. In the first nine months of 2026, we have seen issuances worth US$12 billion in Eurobonds. The countries in the region made a lot of efforts to compress and lower the cost of borrowing. Unfortunately, what we see is that the benchmarks themselves are increasing,” Zeidane said.
His remarks highlight a growing challenge for African economies that rely on international borrowing to finance public expenditure, refinance maturing debt and support development projects.
For Kenya, the warning comes as the government prepares to meet substantial debt repayments before June 2027, placing additional pressure on the National Treasury to balance financing needs against revenue collection and other spending commitments.
Why the IMF Is Concerned About African Borrowing Costs
The IMF’s concern centres on the relationship between global interest rates and the cost of borrowing for individual countries.
When governments issue international bonds, investors generally consider two important factors: the prevailing benchmark interest rate and the additional premium required to compensate for the risks associated with lending to that country.
Even when a country’s credit risk improves, its borrowing costs can still rise if global benchmark rates increase significantly.
Zeidane pointed to the United States, where yields on 10-year Treasury bonds had risen by more than 100 basis points during the year, according to his remarks.
A basis point represents one-hundredth of a percentage point. An increase of 100 basis points is equivalent to one percentage point.
US Treasury yields are an important reference for pricing many dollar-denominated bonds issued by African governments. When these yields rise, governments may have to offer investors higher returns to attract financing.
This can increase the cost of issuing new debt or refinancing existing obligations, even if investors demand a smaller risk premium from a particular African country.
The distinction matters because improved investor confidence does not necessarily translate into cheaper borrowing when international financial conditions are becoming less favourable.
Kenya Faces KSh1.7 Trillion Debt Repayment Challenge
Kenya is among the countries facing pressure to manage large debt obligations while maintaining essential government services and financing development programmes.
According to the figures cited in the original report, the country faces approximately KSh1.7 trillion in public debt repayments before June 2027.
The amount represents about 12.7 per cent of Kenya’s reported KSh13.2 trillion public debt stock.
Of the repayments, approximately KSh1.06 trillion is principal that the government must repay or refinance.
Principal refers to the original amount borrowed, excluding interest and other financing costs.
When substantial amounts of debt mature, the Treasury must find sufficient funds to meet its obligations. It can use revenue, available cash balances or other financing sources, or refinance some maturing obligations through new borrowing where appropriate.
However, refinancing can become more expensive when market interest rates are higher than those attached to the original loans.
For Kenya, the eventual cost will depend on the timing of repayments, the type and currency of the debt, available financing options and the interest rates lenders offer when replacement funds are raised.
How Higher Global Interest Rates Could Affect Kenya
Higher international borrowing costs can affect government finances in several ways.
1. Increased Debt-Servicing Expenses
If Kenya refinances maturing debt at higher interest rates, it may have to pay more interest over the life of the replacement loans.
The impact would depend on how much debt is refinanced, the rates secured and the repayment terms.
Higher interest expenses can place additional pressure on future budgets because debt servicing competes with other government spending priorities.
2. Reduced Budget Flexibility
The government must balance debt obligations against expenditure on infrastructure, healthcare, education, security and other public services.
If interest payments absorb a larger share of available revenue, the Treasury may have less flexibility when allocating money to other priorities.
This does not mean that higher borrowing costs automatically result in spending cuts. The eventual effect depends on revenue performance, expenditure decisions and the government’s overall financing strategy.
3. Greater Pressure on Revenue Collection
Governments may seek to strengthen tax collection and improve compliance to meet their financial obligations.
For Kenya, the challenge is to mobilise sufficient revenue while supporting economic activity and maintaining the funding required for public services.
The balance between taxation, spending and borrowing remains central to the country’s fiscal planning.
4. More Expensive Financing for Development
When governments borrow at higher rates, the cost of financing infrastructure and other long-term projects can increase.
Projects that depend on international financing may become more expensive, particularly where funding is raised in foreign currencies.
Careful project appraisal, transparent procurement and effective management of public investments can help ensure that borrowed funds deliver sufficient economic and social benefits.
Kenya Seeks Alternative Financing After IMF Programme Stalls
Kenya has also been exploring alternative sources of financing following the interruption of its previous IMF programme.
The country’s KSh466.9 billion, equivalent to approximately US$3.6 billion, IMF programme stalled in March 2025 and expired the following month.
On October 16, 2026, Central Bank of Kenya Governor Kamau Thugge reportedly said the country was pursuing additional multilateral financing from institutions including the African Development Bank and the World Bank to support the current financial year’s budget.
Multilateral development institutions can provide governments with financing under terms that differ from those available through international commercial bond markets.
Depending on the facility, funding may have longer repayment periods, concessional interest rates or specific conditions relating to the use of funds and economic policy.
Such financing can help diversify a country’s funding sources, although availability depends on the institution’s assessment, the programme’s requirements and the government’s eligibility.
Kenya’s financing strategy therefore involves more than simply deciding whether to borrow. It also requires consideration of the cost, currency, maturity and conditions attached to each funding option.
Why Eurobond Access Does Not Always Mean Cheaper Loans
The IMF’s observation that African governments issued US$12 billion in Eurobonds during the first nine months of 2026 points to continued access to international capital markets.
A Eurobond is an international bond issued in a currency different from the currency of the market where it is issued. In common financial reporting, the term is frequently used for bonds sold to international investors, including dollar-denominated sovereign debt.
Access to these markets gives governments another way to raise funds for refinancing and public expenditure.
However, successful bond issuance does not necessarily mean that borrowing is affordable or that a country’s debt risks have disappeared.
Governments must still consider the interest rate, repayment schedule, currency exposure and the amount of revenue available to service the debt.
For countries borrowing in US dollars, exchange-rate movements can also affect the local-currency cost of repayment. If a local currency weakens against the dollar, the government may need more local currency to meet the same dollar-denominated obligation.
This is particularly important when a country relies on foreign-currency borrowing but collects much of its revenue in domestic currency.
What African Governments Can Do to Manage Borrowing Costs
The IMF’s warning highlights the importance of sound debt management as governments navigate changing global financial conditions.
Several measures can help countries manage their exposure.
Diversifying financing sources: Governments can assess financing options from domestic markets, multilateral lenders and international investors rather than relying excessively on one source.
Improving debt transparency: Publishing clear information about public debt, guarantees, repayment schedules and financing risks can help improve accountability and support better fiscal planning.
Managing repayment schedules: Where feasible, governments can plan borrowing to avoid excessive concentrations of repayments within short periods.
Strengthening domestic revenue: More effective tax administration and broader compliance can help reduce the need for additional borrowing, although revenue measures must be considered alongside their economic effects.
Evaluating public investments: Borrowed money should be directed towards projects with credible economic or social benefits and supported by transparent financial management.
These measures cannot eliminate the effects of global interest rates, but they can help governments make more informed financing decisions and manage their exposure to financial shocks.
What the IMF Warning Means for Kenya’s Economy
For Kenya, the immediate issue is how the Treasury will meet its debt obligations while securing affordable financing for the national budget.
If international borrowing becomes more expensive, the government may face difficult decisions over the timing and composition of new debt, the use of domestic financing and the allocation of available revenue.
The final impact on the economy will depend on how the government manages these pressures, how revenue performs and whether alternative lenders provide suitable financing.
Businesses and households may also be affected indirectly if higher government borrowing costs influence domestic interest rates, credit availability or public spending. However, these outcomes are not automatic and depend on broader economic conditions and policy choices.
Investors will continue to monitor Kenya’s debt-management strategy, access to financing and ability to meet repayment obligations.
Conclusion
The IMF has warned that rising global benchmark interest rates could increase borrowing costs for African governments, even where countries have improved their standing with investors.
For Kenya, the warning comes as the government prepares to manage substantial debt repayments before June 2027 and explores alternative financing from multilateral institutions.
The central challenge is to meet existing obligations while keeping future borrowing costs manageable and protecting the resources available for development and public services.
The outcome will depend on global financial conditions, the terms of new financing and the government’s ability to manage revenue, expenditure and debt repayments.
IMF Warns of Rising African Borrowing Costs as Kenya Faces KSh1.7 Trillion Debt Repayments
The IMF warns rising global interest rates could make borrowing more expensive for African governments as Kenya prepares to meet KSh1.7 trillion in debt repayments.
IMF warns of rising borrowing costs in Africa
Kenya public debt 2026, KSh1.7 trillion debt repayments, African government borrowing costs, IMF Africa economic outlook, Kenya debt refinancing, US Treasury yields, Kenya IMF programme, World Bank financing Kenya.
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