Overview
On 12 June 2025, the Cabinet Secretary (CS) for the National Treasury & Economic Planning, presented the 2025/2026 budget under the theme: “Sustaining Bottom-up Economic Transformation Agenda, Fiscal Consolidation and Investing in Climate Change Mitigation and Adaptation for Improved Livelihoods.”
In the budget statement, the Government seeks to undertake various strategic interventions to support economic transformation. These include:
- Uphold macroeconomic stability and enhance national security to provide a safe, predictable, and supportive environment for investment and business growth;
- Accelerate the development of key infrastructure including roads, railways, energy, and water systems to reduce the cost of doing business and improve mobility of people and goods;
- Increase investments in agriculture, manufacturing, environmental conservation, climate change mitigation, tourism, and sustainable land use to support broad-based and resilient economic growth;
- Boost investment in health, education, and social safety nets to uplift vulnerable populations and achieve social and economic transformation;
- Promote inclusive growth through targeted programs that support youth, women, and persons with disabilities, supplemented by strategic partnerships with the private sector;
- Enhance county-level capacity and service delivery by allocating sharable revenues to County Governments; and
- Undertake reforms to strengthen public institutions, improve governance, and enhance the efficiency and effectiveness of public service delivery.
In his budget statement, the CS indicated that the government’s expenditure for FY2025/26 is projected at KES 4.2919 trillion. Out of this, recurrent expenditures will amount to KES 3.1344 trillion, while development expenditures, including allocations to domestic and foreign financed projects, Contingency Fund, and Equalization Fund, is KES 693.2 billion. Total allocation to County Governments is projected at KES 474.9 billion, of which equitable share is KES 405.1 billion.
The projected total revenue collection, including appropriation-in-aid for the FY2025/26 budget, is KES 3,321.8 billion. Of this, ordinary revenue is projected at KES 2,754.7 billion, Ministerial Appropriation-in-Aid at KES 567.0 billion, and Grants at KES 46.9 billion.
Given the projected revenue and grants against the projected expenditure, the fiscal deficit including grants is projected at KES 923.2 billion. The fiscal deficit for FY2025/26 will be financed by net external borrowing of KES 287.7 billion and net domestic borrowing of KES 635.5 billion.
According to the fiscal plan, the government aims to reduce the fiscal deficit from 5.7% of GDP in FY 2024/25 to 4.8% of GDP in FY 2025/26, as part of its ongoing fiscal consolidation efforts.
Kenya’s public debt is expected to remain sustainable over the medium term, with the debt-to-GDP ratio projected to decline from 63.0% in 2024 towards the target range of 55% ± 5% by 2028, in line with the Government’s fiscal consolidation efforts.
Kenya's fiscal balance has continuously improved, from a deficit of 4.9% of GDP in FY 2024/25 to a deficit of 4.3% of GDP in FY 2025/26.
The fiscal policy for FY 2025/26 and the medium term supports the Bottom-Up Economic Transformation Agenda and MTP IV through a growth-friendly fiscal consolidation plan aimed at slowing public debt growth, improving debt sustainability, and safeguarding essential services and priority programs.
Contact our Tax and Regulatory team
Click the link below to reach out