Kenya and U.S. agency move forward with $1 billion debt-for-food deal

The U.S. International Development Finance Corporation (DFC) has agreed to move forward with a $1 billion debt-for-food security swap with Kenya, a deal aimed at replacing expensive debt with lower-cost financing.

“We also appreciate DFC for agreeing to proceed with the $1 billion debt-for-food security swap,” the president said in a post on X.

Kenya, weighed down by rising public debt and growing repayment pressures, now faces a high risk of debt distress, according to the World Bank.

The lender’s latest update shows public debt reached 68.8% of GDP in FY 2024/25, up from 67.5% the previous year, with domestic borrowing accounting for 53.6% of the total.

As financial pressures intensify, the East African economic powerhouse has been seeking fresh, cheaper sources of funding to free up resources for infrastructure and development projects.

The proposed $1 billion debt-for-food security swap with the U.S. International Development Finance Corporation (DFC) is expected to offer some relief.

Ruto, who is in Washington for the signing of a U.S.-brokered agreement between the Democratic Republic of Congo and Rwanda, said the DFC will also deepen its engagement with Nairobi, including deploying a permanent representative to Kenya next year, according to Reuters.

The DFC, the United States’ main development finance agency, is backing a structure similar to debt-for-nature swaps recently executed by countries such as Ecuador, Belize and Gabon. Under this model, governments exchange high-cost debt for cheaper financing tied to commitments in targeted sectors.

In Kenya’s case, the arrangement would require the government to channel the savings from restructured debt into food security initiatives.

Debt swaps linked to social and environmental outcomes have grown increasingly popular among developing economies seeking relief from mounting debt pressures while investing in long-term resilience.