Kenya’s ability to meet its debt obligations could come under severe strain as higher global interest rates raise borrowing costs and a stronger US dollar makes foreign-currency payments more expensive, Kiharu MP Ndindi Nyoro has warned.
Nyoro, a former chairman of the National Assembly Budget and Appropriations Committee, said the latest move by the United States Federal Reserve could add to the financial pressure facing the country.
The US central bank raised its benchmark interest rate by 25 basis points on Wednesday, September 16, 2026, placing the rate between 3.75% and 4%.
The Federal Reserve said the decision was aimed at helping bring inflation back to its 2% target.
Nyoro said the higher rates could increase demand for US assets, leading to a stronger dollar. For Kenya, he said, this would raise the amount required to service loans and other obligations denominated in foreign currencies.
“This will lead to a stronger US Dollar due to higher demand. Debt service for foreign holdings has just become more expensive Ceteris Paribus,” Nyoro said.
Domestic debt also under pressure
The Kiharu MP said the impact of the US rate decision could also be felt in Kenya’s local borrowing market.
He expects the Central Bank of Kenya’s Monetary Policy Committee to respond to the change, although he said this would depend on whether the institution is allowed to make its decisions without political interference.
“Expect the CBK’s Monetary Policy Committee to follow suit, especially if there is no political interference in their decision. This will make the domestic debt more expensive,” he said.
Nyoro said the expected increase in the cost of borrowing comes at a time when a large share of the government’s ordinary revenue is already being used to repay debt.
“With a country that is currently spending 75% of ordinary revenue on debt service and which is set to rise to around 90% next year, we will be lucky to get through without debt restructuring, which may include moratoriums and haircuts,” he said.
He said the combination of expensive debt, foreign-exchange pressure and the country’s wider financial obligations could leave Kenya increasingly exposed to a default situation.
“This may sound like kizungu mingi but this is the 1st Chapter of defaulting,” Nyoro said.
Nyoro also singled out the court battle over the sale of a 15% stake in Safaricom as another issue that could put pressure on Kenya’s dollar reserves.
He said the country could experience more than $1.8 billion in dollar outflows if the Court of Appeal confirms the nullification of the transaction.
At the same time, Nyoro said Kenya’s need to import key commodities would add to demand for foreign currency.
He pointed to the planned importation of more than 20 million bags of maize as one of the areas that could increase pressure on the country’s foreign-exchange position.
“With crude above $100 Per Barrel, the problem becomes more exacerbated,” he said.
The MP further said the changing interest-rate environment could affect investment decisions, with fixed-income investments becoming relatively more attractive in the short term.
He warned that the pressure would also spread beyond government finances, affecting companies and ordinary households.
“Unfortunately, this will affect many unsuspecting and innocent Kenyans in very many ways,” Nyoro said.
Nyoro said the country’s economic challenges would require practical financial management rather than efforts focused on public relations.
“Management of the Economy does not respect PR. You simply just have to do the hard work,” he said.