NAIROBI, Kenya — Kenya’s public finances have come under renewed strain after the Kenya Revenue Authority (KRA) fell short of its tax collection target by Sh152.2 billion in the first half of the 2025/26 financial year, heightening concerns over increased borrowing and possible cuts to development spending.
Data from the National Treasury shows that KRA collected Sh1.161 trillion between July and December 2025, compared with a Sh1.314 trillion mid-year target required to remain on track for the Sh2.627 trillion annual revenue goal.
The shortfall means the tax agency achieved 88.4 per cent of its half-year target, underscoring mounting pressure on the government’s fiscal position at a time of rising debt servicing costs and limited scope for introducing new taxes.
Although revenue performance improved compared to the same period last year, collections still fell short of Treasury’s ambitious projections.
A similar trend was recorded in the previous financial year, when KRA missed its half-year target by Sh163.46 billion, collecting Sh1.07 trillion against a target of Sh1.23 trillion.
Last year’s revenue gap was largely attributed to the rejection of the Finance Bill, which forced the withdrawal of several proposed tax measures.
This time, however, no major legislative disruptions occurred, pointing to persistent structural challenges in revenue mobilisation.
Treasury officials remain cautiously optimistic that higher corporate tax payments in the final months of the financial year could help narrow the deficit.
However, the Sh2.627 trillion annual target remains one of the most aggressive in recent years.
Failure to meet the target could widen the fiscal deficit, forcing the government to either scale up borrowing or delay planned development projects.
Domestic borrowing has already increased sharply, raising concerns about crowding out private sector credit, while access to external financing remains constrained by Kenya’s elevated debt levels and tighter global financial conditions.
The Parliamentary Budget Office (PBO) has warned against over-reliance on new tax measures, urging the government to prioritise enforcement and compliance instead.
“Rather than relying on the introduction of new tax policies that are likely to create new tax burdens on Kenyans, the government may focus on improving tax administration through better enforcement of current tax policies, enhanced data analytics and increased use of technology to simplify tax processes and improve tax compliance,” the PBO said in a previous review.
KRA has rolled out several digital tools, including electronic invoicing and data-matching systems, as part of efforts to expand the tax base.
However, compliance remains uneven, particularly among small and informal businesses that account for a significant share of economic activity.
The Ruto administration has repeatedly pledged to stabilise public finances while protecting development spending, a balancing act that is likely to come under increasing strain if revenue performance continues to lag behind projections.
