NAIROBI, Kenya – President William Ruto’s administration has ruled out introducing new taxes in the 2026-27 financial year, instead banking on tax compliance, privatisation of state corporations, and tighter spending controls to bridge widening budget gaps.
The position, outlined in the Draft 2025 Budget Review and Outlook Paper (BROP) released Monday, reflects the government’s cautious approach to fiscal policy following public uproar over last year’s aborted Finance Bill.
Treasury said the priority will be improving efficiency in revenue collection and creating a stable tax regime to encourage investment.
“Key revenue measures will focus on reducing tax expenditures, expanding the tax base, improving compliance and streamlining tax structures to stimulate investment,” the document states.
Treasury Cabinet Secretary John Mbadi reinforced the message at an ODM parliamentary group meeting, stressing that raising taxes was “not an option” given current economic pressures.
“The option of raising taxes is not available for us. We can only improve the efficiency of the Kenya Revenue Authority,” Mbadi said, adding that privatisation remains a viable revenue source. “The good thing with privatisation is that it makes the private sector vibrant instead of taking resources from them.”
Plugging the Budget Gap
Despite the no-new-tax stance, Treasury projects revenues of Sh3.58 trillion against spending of Sh4.64 trillion in 2026-27 — leaving a Sh1 trillion financing hole.
The government plans to raise Sh241 billion domestically and borrow Sh775 billion from external lenders to plug the gap.
Total revenue is expected to grow by Sh260 billion, lifting the revenue-to-GDP ratio to 17.1 per cent.
Expenditures, however, are set to rise by Sh350 billion, largely driven by recurrent costs, which will consume Sh3.4 trillion.
Development spending is budgeted at Sh761 billion, while counties will receive Sh446.6 billion.
Reforms and Discipline
It also proposes zero-based budgeting across ministries and agencies, requiring programmes to justify funding from scratch — a measure aimed at ensuring only high-impact projects are prioritised.
Treasury also promised businesses and investors a predictable tax environment under the National Tax Policy and Medium-Term Revenue Strategy.
The draft budget framework is open for public submissions until Thursday before it goes to Cabinet on September 30.
