Kenya projects 5.3% economic growth in 2026 as Treasury proposes Ksh.4.7T budget

Speaking before the National Assembly Budget Committee, National Treasury Cabinet Secretary John Mbadi outlined a proposed Ksh.4.7 trillion expenditure budget for the financial year 2026/27, with Ksh.3.45 trillion allocated for recurrent expenditure and Ksh.749.5 billion earmarked for development projects. Counties are expected to receive Ksh.495.5 billion to fund devolved services.

Mbadi warned that the country’s ballooning wage bill, which consumes Ksh.3.5 trillion of the recurrent expenditure, poses a serious threat to economic sustainability. 

“To realise these fiscal outcomes, the government will continue to pursue prudent fiscal consolidation through sustainable revenue mobilisation, targeted policy and administrative reforms, rationalisation of non-essential expenditure, and improved spending controls,” he said on Monday.

The CS urged parliament to explore constitutional amendments to streamline government functions and reduce duplication of roles at national and county levels. He questioned the necessity of multiple director positions in counties, noting that the wage bill has surged from Ksh.75 billion to Ksh.90 billion.

The Treasury’s budget framework also includes a Ksh.2 billion contingency fund and a projected deficit of Ksh.1.1 trillion, which will be financed through Ksh.225.5 billion in external borrowing and Ksh.890.4 billion in domestic borrowing. 

Mbadi admitted past challenges in revenue collection, saying, “The truth is we have been over-projecting our revenue. Our tax administration system has failed us.”

Despite the fiscal pressures, the Treasury highlighted areas of growth and development. The government projects total revenue of Ksh.3.588 trillion, equivalent to 17.1% of GDP, reflecting reforms in tax administration and digitalisation of revenue collection.

Priority sectors for development spending include education, healthcare, infrastructure, agriculture, and national security.

Key economic initiatives such as affordable housing, industrial parks, infrastructure investments, and expansion of power generation are expected to stimulate jobs, boost manufacturing, and improve Kenya’s competitiveness in the region. The government also continues to support MSMEs through funds targeting youth, women, and grassroots entrepreneurs.