The Lower Eastern Times Opening The Third Eye
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Kenya’s status as a Lower Middle-Income Country (LMIC), once seen as a milestone, is increasingly being viewed as a challenge for the nation’s health sector, according to a new report by the Centre for Epidemiological Modelling and Analysis (CEMA) at the University of Nairobi.
The study shows that as Kenya’s economy grew, access to life-saving donor grants steadily declined, forcing the government to rely heavily on concessional loans to fund healthcare. While intended to support the sector, this borrowing is contributing to rising public debt and straining the system.
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“The transition away from donor dependency is happening faster than domestic tax revenues can support,” the report titled Immediate Impact of External Funding Withdrawal on Kenya’s Health Sector notes.
Between 2019/20 and 2025/26, Kenya received more loans than grants in external health funding, with 83.2% of on-budget external support in 2021/22 coming in the form of loans. Because healthcare services do not generate immediate revenue, these loans increase national debt while offering no direct return.
The LMIC classification also limits access to grants, forcing Kenya to finance healthcare primarily through loans. The report highlights that as donor support from initiatives such as Gavi diminishes, the country must increasingly use its own budget to cover costs like vaccines and family planning products.
Lead author Dr. David Khaoya described the situation as a wake-up call for Kenya and other African countries:
“External funding has long been significant for Kenya’s health sector, but it is unpredictable and unsustainable. This funding shock is an opportunity to rethink health financing and build long-term resilience.”
The financial strain is compounded by major donors withdrawing support. Total external funding for health is projected to drop to Sh54 billion in FY 2025/26, down from Sh126 billion the previous year. A landmark $2.5 billion Health Cooperation Framework signed with the United States in December 2025 aimed to ease the transition to self-reliance, but implementation is currently suspended by a High Court order over public participation and data concerns.
The CEMA report urges Kenya to explore innovative financing options, such as sin taxes, impact bonds, debt swaps, and negotiating for more grant funding aligned with national priorities. The study warns that continued reliance on loans for basic health services, including HIV treatment and vaccination programs, could further deepen the debt trap.
Co-authors of the report include Ombajo Loice, Mutono Nyamai, Nyaikamba Purity, Oumaima Laraj, Njuguna Brian, Musasia Ryan, Omondi Austine, and Thumbi Mwangi. They concluded that Kenya’s health sector remains highly vulnerable to external funding shocks and needs urgent reform to ensure sustainability.
