NAIROBI, Kenya – Auditor General Nancy Gathungu has issued a scathing assessment of Kenya’s proposed Sh4.24 trillion budget for 2025–26, warning that overly ambitious revenue projections, poor financial discipline, and ineffective development spending could drag the country deeper into debt while weakening essential public services.
In a 24-page presentation to the National Assembly’s Budget and Appropriations Committee, Gathungu flagged serious concerns about the sustainability of the government’s economic strategy, urging urgent reforms to avoid compounding fiscal vulnerabilities.
“The KRA’s targets are disconnected from reality,” Gathungu stated, criticising the Kenya Revenue Authority’s collection goals as unrealistic and not grounded in enforceable strategy.
The budget expects to raise Sh2.76 trillion in ordinary revenue, but Gathungu warned that persistent shortfalls—driven by tax evasion, weak enforcement, and inaccurate forecasting—make those targets highly unreliable.
In 2023–24, the government missed its revenue target by Sh170 billion, or nearly 7 percent.
Tax arrears have ballooned to Sh2.33 trillion, a 133 percent spike in just one year, further exposing the fragility of Kenya’s fiscal base.
The current tax-to-GDP ratio remains below the World Bank-recommended 15 percent, weakening the country’s ability to fund services without resorting to borrowing.
“Inflated projections are pushing the government into deeper debt,” Gathungu warned. Kenya’s public debt now stands at Sh11.1 trillion.
The Auditor General urged the National Treasury to adopt “cautious, evidence-based forecasts” and overhaul the tax system to improve compliance and curb evasion.
Development Spending Fails to Deliver
Gathungu also took aim at the government’s poor record on development spending.
While Sh643.9 billion—roughly 26 percent of the 2025–26 budget—is earmarked for development, actual spending consistently falls short of the legally mandated 30 percent threshold.
In the 2023–24 fiscal year, only 29 percent of allocated development funds were utilised, resulting in incomplete projects and a growing pile of pending bills.
Donor-funded projects were especially underwhelming: out of Sh515 billion allocated, just Sh211 billion had been spent by mid-2024.
The failure to draw down loan funds led to Sh6.57 billion in penalties, adding to the cost of inaction.
Among the worst offenders is the Mombasa Gate Bridge project, where just Sh938 million has been spent—leaving 98 percent of the funds untouched.
Ripple Effects on Services
Gathungu’s warning adds to growing alarm over the country’s fiscal management.
Budget delays have already disrupted government services, while marginalised counties have been denied access to Sh46.5 billion from the Equalisation Fund.
Meanwhile, Parliament is facing criticism for plans to divert Sh833 million from police medical insurance to clear dormant hospital bills.
