The National Treasury has unveiled a KSh 4.4 trillion budget proposal for the 2025/26 financial year, a significant increase from the 2024/25 budget.
This ambitious budget outlines the government’s fiscal priorities, focusing on stimulating economic growth, reducing public debt, and enhancing the delivery of critical public services.
“The total budget for FY 2025/26 is projected at KSh 4,485.7 billion. This includes allocations to the three Arms of Government and sharable revenues to County Governments,” states the draft 2025 budget policy statement, themed “Consolidating gains under the bottom-up economic transformation agenda for inclusive green growth.”
Fiscal Deficit
Kenya aims for a budget deficit of 3.9% of GDP in the 2025/26 (July-June) financial year, according to the National Treasury’s Draft 2025 Budget Policy Statement. This represents a decrease from the 4.3% of GDP projected for FY 2024/25.
The Treasury states that this deficit will be financed through a combination of external and domestic borrowing:
- Net External Financing: KSh 213.7 billion (1.1% of GDP)
- Net Domestic Financing: KSh 545.8 billion (2.8% of GDP)
Revenue Projections
- Total revenue, including Appropriation-in-Aid (A-i-A), is projected to reach KSh 3,516.6 billion (18.2% of GDP) in FY 2025/26, a substantial increase from the projected KSh 3,060.0 billion (16.9% of GDP) in FY 2024/25.
- Ordinary revenue is projected at Ksh 3,018.8 billion (15.7% of GDP), up from the projected Ksh 2,631.4 billion (14.6% of GDP) in FY 2024/25.
Expenditure Projections
- Overall expenditure and net lending are projected at KSh 4,329.3 billion (22.5% of GDP) in FY 2025/26, compared to the projected KSh 3,880.8 billion (21.5% of GDP) in FY 2024/25.
- This includes:
- Recurrent Expenditure: KSh 3,076.9 billion (16.0% of GDP)
- Development Expenditure: KSh 804.7 billion (4.2% of GDP)
- Transfers to Counties: KSh 442.7 billion
- Contingency Fund: KSh 5.0 billion
Summary of the major changes as per the BPS 2025 from the expected FY 2025/2026 budget performance:
| Comparison of 2024/25 and 2025/26 Fiscal Year Budgets as per the 2025 Budget Policy Statement | ||||
| FY’2023/2024 Budget Outturn (Kshs bn) | FY’2024/2025 Revised Estimates (Kshs bn) | FY’2025/2026 BPS (Kshs bn) | % change 2024/25 to 2025/26 | |
| Total revenue | 2,702.7 | 3,060.0 | 3,516.6 | 14.9% |
| External grants | 22.0 | 52.3 | 53.2 | 1.7% |
| Total revenue & external grants | 2,724.7 | 3,112.3 | 3,569.8 | 14.7% |
| Recurrent expenditure | 2,678.4 | 2,826.2 | 3,076.9 | 8.9% |
| Development expenditure & Net Lending | 546.4 | 599.5 | 804.7 | 34.2% |
| County governments + contingencies | 380.4 | 455.1 | 447.7 | (1.6%) |
| Total expenditure | 3,605.2 | 3,880.8 | 4,329.3 | 11.6% |
| Fiscal deficit including grants | 880.5 | 768.5 | 759.5 | (1.2%) |
| Deficit as % of GDP (Including grants) | 5.6% | 4.4% | 3.9% | (0.5%) |
| Net foreign borrowing | 222.7 | 355.5 | 213.7 | (39.9%) |
| Net domestic borrowing | 595.6 | 413.1 | 545.8 | 32.1% |
| Total borrowing | 818.3 | 768.6 | 759.5 | (1.2%) |
| GDP Estimate | 15,826.4 | 17,434.5 | 19,272.8 | 10.5% |
Source: Cytonn Investments.
Budget Priorities
The FY 2025/26 budget and the accompanying Medium-Term Framework prioritize the implementation of the Bottom-Up Economic Transformation Agenda (BETA), a key component of the Medium-Term Plan (MTP) IV under Kenya Vision 2030.
BETA aims to drive economic recovery and foster inclusive growth by focusing investments on five key pillars:
- Agricultural transformation and inclusive growth
- Support for micro, small, and medium enterprises (MSMEs)
- Housing and settlement development
- Healthcare advancement
- Promotion of the digital superhighway and creative industries
Budget Allocations
National Government:
-
- Total allocation: KSh 2,749.5 billion (61.3% of the total budget)
- Executive: KSh 2,681.4 billion (59.8% of the total budget)
- Parliament: KSh 42.5 billion (0.9% of the total budget)
- Judiciary: KSh 25.6 billion (0.6% of the budget)
-
Consolidated Fund Services (CFS):
- Total Allocation: KSh 1,331.1 billion (29.7% of the total budget)
- Covers mandatory expenditures such as debt servicing, pensions, and other statutory obligations.
-
County Governments:
- Total allocation: KSh 410.8 billion (9.0% of the total budget)
- Sharable Revenue: KSh 380 billion
- Arrears: KSh 30.8 billion
The proposal will now be presented to Parliament for debate and approval. Lawmakers will scrutinize the allocations and revenue projections to ensure they align with the country’s development goals and economic realities.
