Nairobi, May 5 -- Holders of domestic bonds, including commercial banks, insurance firms, pension funds and households, will earn nearly Sh1 trillion in interest in the financial year starting July 1, highlighting the impact of local borrowing on taxpayers.

Debt service on domestic debt is set to rise by Sh103 billion, reaching Sh986.7 billion in the financial year ending June 30, 2027, from Sh883.7 billion in the current fiscal year.

Interest on internal debt has risen in tandem with the State's increasing reliance on domestic borrowing to plug the annual budget deficit as access to external financing remains volatile.

Domestic interest payments are projected to hit a record Sh1 trillion in the financial year starting July 1, 2028, as...