NAIROBI, Kenya — The government has proposed a Sh4.8 trillion national budget for the 2026/27 financial year, with rising debt obligations continuing to exert significant pressure on public finances.
National Treasury and Economic Planning Cabinet Secretary John Mbadi is set to present the spending plan to Parliament on Thursday, outlining government priorities for the financial year beginning July 1, 2026.
The budget is being tabled against a backdrop of elevated inflation, increasing fuel costs, and persistent concerns over the cost of living facing households and businesses.
Debt Repayments Consume Largest Share
A significant portion of the budget will be allocated to Consolidated Fund Services (CFS), which includes debt repayment obligations and statutory expenditures.
Treasury has proposed Sh1.5 trillion for CFS, representing a 9.9 per cent increase from the current allocation of Sh1.37 trillion.
According to Budget and Appropriations Committee Chairperson Samuel Atandi, growing debt servicing costs remain one of the biggest fiscal challenges facing the country.
“The sector that is taking our money is interest on debt, which has grown from Sh1 trillion to Sh1.5 trillion,” Atandi said.
The increase highlights the continued strain that public debt repayments are placing on government expenditure plans.
Education Receives Largest Allocation
Education will once again receive the largest share of government spending, with an allocation of Sh781.4 billion.
The funding is expected to support implementation of education reforms, including programmes under the Competency-Based Curriculum (CBC), teacher recruitment, university funding, and technical training institutions.
The allocation comes as the government begins implementing elements of a zero-based budgeting approach aimed at improving efficiency and accountability in public expenditure.
Revenue Collection Remains a Challenge
Treasury projects total revenue and grants of Sh3.67 trillion in the 2026/27 financial year, representing a 6 per cent increase from current projections.
Ordinary revenue is expected to rise from Sh2.78 trillion to Sh2.99 trillion, driven by improved collections from income tax, Value Added Tax (VAT), import duties, and excise taxes.
However, Mbadi acknowledged that revenue mobilisation remains a major challenge.
“Revenue collection is a big challenge and it is informed by a number of factors. One of them is inefficiency at the Kenya Revenue Authority. That cannot be wished away,” he said.
The Treasury CS said ongoing reforms at the Kenya Revenue Authority are expected to improve compliance and efficiency without introducing new taxes.
“We had allocation for KRA to carry out reforms, about Sh17 billion, and a lot of reforms are happening at KRA. I’m sure in the coming financial year, KRA will be able to collect more without us raising taxes,” Mbadi added.
Deficit to Be Financed Through Borrowing
Despite projected revenue growth, the spending plan leaves a budget deficit of approximately Sh1.2 trillion.
The government plans to bridge the financing gap through a combination of domestic and external borrowing.
Recurrent expenditure is projected to rise to Sh2.05 trillion, while development expenditure is expected to decline by 3.9 per cent to Sh845.2 billion.
County governments are set to receive at least Sh428 billion in equitable share and grants.
Heightened Security Ahead of Budget Reading
Security was significantly reinforced around the Treasury Building and across Nairobi’s central business district ahead of the budget presentation.
Police officers, mounted units, and patrol teams were deployed at strategic locations as authorities moved to secure the area during the reading of one of the country’s most closely watched fiscal statements.
Treasury Principal Secretary Chris Kiptoo joined senior government officials in final preparations before the presentation.
The 2026/27 budget is expected to set the government’s economic agenda for the coming year as it seeks to balance fiscal consolidation, debt management, job creation, and support for key sectors amid ongoing economic pressures.
