Kenya’s Fiscal Crossroads: Why Global Diversification Still Matters

Recent headlines and the World Bank’s own Kenya Economic Update, have drawn attention

to the country’s mounting fiscal pressures and the growing risk of sovereign default. While

the situation is serious, it is not a call to panic but rather a timely reminder of the importance

of thoughtful, globally diversified investment strategies.

According to the World Bank, Kenya’s public debt remains at high risk of distress. 

The government’s increasing reliance on short-term borrowing at yields approaching 17% has crowded out development spending and private sector credit. These dynamics are not just macroeconomic abstractions; they have real implications for investors, institutions, and families with local exposure.

One area of concern is the banking sector. Kenyan banks hold a significant share of government debt, much of it short-dated. In the event of a default or restructuring, the ripple effects could be felt across the financial system, impacting liquidity, credit availability, andeven depositor confidence.

But this is not a call to “run for the hills.” Rather, it’s a moment to revisit the core principles of sound portfolio construction:

• Diversification across geographies and currencies — helps mitigate the impact oflocalised shocks.

• Holding assets in international jurisdictions — whether through general investment accounts, offshore bonds, or offshore trusts — can provide insulation from domestic volatility.

• Liquidity and cash flow from globally diversified wealth portfolios — can serve asa vital buffer during periods of local economic stress, allowing families and institutionsto meet obligations without being forced to liquidate distressed local assets.

Our Q1 2025 Market Commentary reinforces these themes, noting that high-quality investment assets and global diversification remain essential tools for navigating uncertainty.

For clients with Kenyan exposure whether through property, business interests, or local securities, this is a good time to review allocations, assess liquidity buffers, and ensure that long-term goals remain on track.

At Waugh McDonald, we remain committed to helping our clients preserve and grow their wealth across generations and jurisdictions. If you’d like to discuss your portfolio in light of recent developments, we’re here to help.

For support in navigating Kenya’s current economic climate and ensuring your investment strategy stays on track, reach out to us at info@waughmcdonald.co.ke.