Kenya is projected to spend approximately Sh1.25tn to Sh1.29tn on public debt interest payments for 2026-27 financial year. DEVELOPING countries paid nearly Sh130 trillion in interest in 2025 as expensive borrowing squeezes resources for healthcare, education and infrastructure.
According to UN Trade and Development (UNCTAD), rising borrowing costs are threatening development across the world, with developing countries spending an increasing share of public resources servicing debt, instead of investing and other essential services. In its latest World of Debt publication, UNCTAD says developing countries paid nearly $1 trillion (about Sh129.5 trillion) in net interest on public debt in 2025, almost three times the $363 billion (Sh47 trillion) paid in 2010.
The report highlights the growing financial pressure on governments that must meet debt obligations while addressing infrastructure gaps, unemployment and rising demand for public services. “Debt should help countries invest in their future. But in many developing countries, the servicing of external debt now exceeds new inflows,” UNCTAD says.
Since 2022, interest payments on external public debt have exceeded net new lending to developing countries, meaning more resources are going towards servicing existing obligations than are coming in through fresh financing. The trend is forcing governments to rely increasingly on domestic borrowing, which can raise financing costs and leave fewer resources available for development.
UNCTAD estimates that global public debt reached $111 trillion (about Sh14,374.5 trillion) in 2025, up from $49 trillion (Sh6,345.5 trillion) in 2010. Although developed economies hold more than two-thirds of the global debt stock, borrowing has increased much faster in developing countries.
The report identifies a significant disparity in financing costs. Developing countries paid an average interest rate of 5.2 per cent on public debt, compared with 2.2 per cent in developed economies. This means developing countries pay more than twice the average interest rate borne by developed economies, despite often having fewer financial resources and greater development needs.