Kenya’s Treasury Cabinet Secretary John Mbadi outlined tax measures to finance Ksh4.82 trillion ($37.2 billion) budget for the 2026/27 fiscal year on Thursday. The spending plan comes as the government grapples with weaker revenue collection, rising debt obligations, volatility in international financial markets and economic disruptions linked to the conflict in the Middle East.

Budget snapshotThe 2026/27 budget represents a 4.1 percent increase from Ksh4.63 trillion ($35.89 billion) in the current 2025/26 fiscal year.

Treasury has allocated Ksh3.53 trillion ($27.36 billion) for recurrent expenditure and Ksh749 billion ($5.8 billion) for development spending.

County governments are set to receive Ksh495.5 billion ($3.84 billion), while Ksh2 billion ($15.5 million) has been earmarked for the Contingency Fund.

Deficit challengeKenya projects a fiscal deficit of Ksh1.11 trillion ($8.6 billion), including grants, in the 2026/27 fiscal year.

The gap will be financed through net external borrowing of Ksh116.2 billion($900.77 million) and net domestic borrowing of Ksh995.7 billion ($7.71 billion).

The financing mix underscores the government's continued reliance on debt markets despite efforts to contain borrowing.

Revenue targetTotal revenue, including Appropriation-in-Aid, is projected at Ksh3.62 trillion ($28.06 billion), up from Ksh3.39 trillion ($26.27 billion) in 2025/26.

Ordinary revenue is expected to rise to Ksh2.98 trillion ($23.1 billion) from Ksh2.78 trillion ($21.55 billion) in the current fiscal year.

The revenue assumptions will be closely scrutinised given recent shortfalls in tax collection.

Growth worriesTreasury's plans face mounting pressure from a weaker economic outlook.

The African Development Bank has revised Kenya’s 2026 growth forecast down to 4.6 percent from 5.2 percent, citing the economic fallout from the Middle East conflict.

In its latest economic outlook released in May, the lender said supply-chain disruptions had increased energy and import costs while worsening food-security risks across East Africa.

Kenya’s economy expanded by 4.6 percent in 2025, down from 4.7 percent in 2024.

Debt burdenDebt-servicing costs continue to consume a growing share of government resources.

Interest payments on public debt have risen from 15 percent of the budget in the 2018/19 fiscal year to more than 25 percent in 2025/26, equivalent to Ksh1.09 trillion ($8.44 billion).

The increase has narrowed fiscal space and limited resources available for development spending and public services.

Price pressuresInflation accelerated to 6.7 percent in May, the highest level in 28 months, from 5.6 percent in April.

The increase was driven largely by higher fuel costs, adding pressure on households and businesses already facing elevated living expenses.

Rising debt-servicing costs have compounded the challenge by reducing the government's fiscal flexibility.

Fuel backlashThe Energy and Petroleum Regulatory Authority (EPRA) raised super petrol prices by 8.42 percent to Ksh214.25 ($1.66) per litre and diesel prices by 23.54 percent to Ksh242.96 ($1.88) per litre during the May 15–June 14 review period.

The increases triggered public anger and street protests.

Following the first day of demonstrations, EPRA reduced diesel prices by Ksh10.06 ($0.07) per litre to Ksh232.86 ($1.80). However, the adjustment shifted costs to kerosene, a fuel widely used by low-income households for cooking.

© Copyright 2026 Nation Media Group. All Rights Reserved. Provided by SyndiGate Media Inc. (Syndigate.info).