Kenya’s fiscal managers are weighing significant reductions to next year’s national spending plan as mounting economic headwinds force a rethink of priorities, with additional taxation remaining among the options under review.
The National Treasury is reviewing the Sh4.8 trillion budget for the 2026/27 fiscal year, according to officials familiar with the deliberations. Planners are under pressure to reconcile ambitious expenditure targets with a revenue base that has underperformed projections for consecutive years. The Kenya Revenue Authority missed its collection target by more than Sh100 billion in the 2024/25 financial year, compounding the challenge facing the exchequer.
Global factors are amplifying the strain. A stronger US dollar has raised the cost of servicing Kenya’s substantial external debt, which stood at approximately Sh5.1 trillion as of early 2026. Tightening conditions in international capital markets have made it more expensive to roll over commercial borrowings, including Eurobond repayments that absorbed significant resources in 2024.
Treasury officials have held consultations with the International Monetary Fund, which has pressed Kenya to narrow its fiscal deficit under the terms of an ongoing support programme. The arrangement conditions future disbursements on demonstrated fiscal consolidation measures.
Domestic obligations are equally pressing. The government must fund salaries for hundreds of thousands of public servants, service local debt through the Central Bank’s weekly Treasury bill auctions, and maintain constitutional transfers to counties under the equitable share formula.
Any new tax measures would require parliamentary approval. Lawmakers remain visibly cautious after a proposed Finance Bill was withdrawn in 2025 following deadly protests, and many are reluctant to publicly endorse fresh levies with the 2027 general election approaching.
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