Kenya unveils 2025/26 national budget with focus on economic recovery and fiscal sustainability

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Lagos, Nigeria – Kenya has presented its National Budget for the 2025/26 financial year, totalling KSh 4 trillion (approximately $31.01 billion). The budget underscores the government’s commitment to economic recovery and fiscal discipline, prioritising strategic investments in key sectors and aiming to significantly reduce the fiscal deficit.

The government anticipates revenue of KSh 2.8 trillion ($21.7 billion), marking a 15 per cent increase from the previous fiscal year. Total expenditure is projected at KSh 4 trillion ($31.01 billion), resulting in a deficit of KSh 1.2 trillion ($9.3 billion). This represents 3.3 per cent of the country’s gross domestic product (GDP), down from 5.7 per cent recorded in 2023/24.

The budget outlines major investments in agriculture, infrastructure, education and healthcare. The agricultural sector is allocated KSh 250 billion ($1.9 billion) to modernise irrigation systems and support smallholder farmers. Infrastructure development is set to receive KSh 400 billion ($3.1 billion) to fund road construction, port expansion and rail transport. Education will see an allocation of KSh 500 billion ($3.9 billion) to enhance access to primary, secondary and tertiary education. The healthcare sector is allocated KSh 300 billion ($2.3 billion) to improve systems and expand national health insurance coverage.

The fiscal deficit will be funded through a mix of external and domestic borrowing. External financing is expected to contribute KSh 333.8 billion ($2.6 billion), primarily through concessional loans. Domestic borrowing will raise KSh 263.2 billion ($2.03 billion) through treasury bills and bonds. Additional revenue measures include reforms aimed at generating KSh 346.7 billion ($2.7 billion), such as increased levies on financial services and manufacturing.

The budget is underpinned by a projected economic growth rate of 5.5 per cent for 2025/26. Key sectors such as agriculture, manufacturing, technology and tourism are expected to drive this growth. The government estimates that these sectors will create 1.5 million new jobs, particularly in agribusiness and export-oriented industries.

While the budget aligns with recovery goals, some proposed fiscal reforms have sparked concerns. Business leaders in the manufacturing and retail sectors have warned of potential cost increases and reduced competitiveness due to higher taxes. Citizens are also feeling the pinch of inflation, which stood at 6.8 per cent in the last quarter of 2024, exacerbating the cost of living.

In response, the government has increased support for vulnerable groups. Subsidies for low-income households have been raised by 20 per cent, while a new fund worth KSh 50 billion ($388 million) has been set up to support micro and small enterprises.

The 2025/26 National Budget reflects a balanced approach to economic recovery and fiscal sustainability. The government’s commitment to reducing the deficit to 3.3 per cent of GDP is expected to restore investor confidence and improve Kenya’s credit standing. Analysts have praised the fiscal measures but cautioned that effective implementation of reforms and timely execution of projects will be critical to achieving the budget’s objectives.

Kenya’s focus on inclusive and sustainable growth positions it to navigate short-term economic challenges and reinforce its standing as one of Africa’s most dynamic economies.