Kenya’s budget is set to cross the KSh5 trillion mark for the first time in the 2027/28 financial year, with the National Treasury projecting total expenditure of KSh5.323 trillion.
The proposed budget is equivalent to 23.1 per cent of the country’s Gross Domestic Product (GDP), according to the Draft 2026 Budget Review and Outlook Paper.
Treasury projects total revenue, including Appropriation-in-Aid, at KSh3.943 trillion, equivalent to 17.1 per cent of GDP.
This leaves a fiscal deficit of KSh1.321 trillion, or 5.7 per cent of GDP, which will have to be financed through borrowing.
Development expenditure has been projected at KSh958 billion, representing 4.2 per cent of GDP.
The Treasury has also set aside KSh472.8 billion for transfers to county governments and KSh5 billion for the Contingency Fund.
The proposed allocations put recurrent spending at more than four times the amount set aside for development projects.
Government Targets KSh3.94 Trillion in Revenue
The government expects to raise KSh3.943 trillion in total revenue during the 2027/28 financial year.
Of this amount, ordinary revenue is projected at KSh3.2078 trillion, equivalent to 13.9 per cent of GDP.
The Treasury says the revenue target will be supported by ongoing reforms in tax policy and revenue administration.
Appropriation-in-Aid is projected to contribute KSh735.2 billion, while grants are estimated at KSh58.8 billion.
The revenue projections come against a backdrop of efforts by the government to increase collections and reduce the gap between revenue and expenditure.
Kenya Plans KSh1.32 Trillion Borrowing
The KSh1.321 trillion fiscal deficit will be financed through both domestic and external sources.
Treasury plans to raise KSh1.0852 trillion through net domestic financing, equivalent to 4.7 per cent of GDP.
A further KSh235.9 billion will come from net external financing, equivalent to 1 per cent of GDP.
Domestic borrowing will therefore account for the larger share of the financing required to fund the 2027/28 budget.
The size of the projected deficit means debt financing will remain a major feature of the government’s spending plans.
Counties Set to Receive KSh472.8 Billion
County governments are projected to receive KSh472.8 billion in the 2027/28 financial year.
Of this amount, KSh440.1 billion is listed as the equitable share, equivalent to 1.9 per cent of GDP.
The county allocation forms part of the wider KSh5.323 trillion expenditure framework proposed by Treasury.
County governments rely on the equitable share and other transfers from the national government to finance devolved functions, including healthcare, agriculture and local infrastructure.
Treasury to Use Zero-Based Budgeting
Treasury says the 2027/28 budget will be prepared under a constrained resource environment, requiring government agencies to reassess how they spend public money.
The government will continue using a zero-based budgeting approach, requiring Ministries, Departments and Agencies to review planned and existing programmes before resources are allocated.
Under the approach, low-priority expenditure is expected to be reduced in favour of programmes considered more important for service delivery.
Treasury says the principles of efficiency, effectiveness and prudence in public spending will guide the process.
Projects to Be Prioritized
The government has set out several criteria that will guide the final allocation of resources.
Programmes linked to the Bottom-Up Economic Transformation Agenda will receive consideration, alongside projects aligned with the fourth Medium-Term Plan under Vision 2030.
Treasury will also prioritize the completion of ongoing projects, stalled projects and the payment of verified pending bills.
Other considerations include programmes that create jobs, reduce poverty, support climate change mitigation and adaptation, promote gender equality and protect children’s rights.
Government agencies will also be required to demonstrate that programmes are cost-effective, efficient and sustainable.
Nine Value Chains Identified for Government Support
The 2027/28 budget and the medium-term spending framework will remain aligned with the government’s priorities under the Medium-Term Plan IV and the Bottom-Up Economic Transformation Agenda.
Treasury says resources will be allocated using a value-chain approach covering five broad sectors: Finance and Production, Infrastructure, Environment and Natural Resources, Social Sectors, and Governance and Public Administration.
The government says the approach is intended to ensure that resources are allocated across the different stages of a value chain instead of funding isolated projects.
Treasury expects the approach to reduce duplication, improve the use of public funds and support economic activity and job creation.
Government Agencies Ordered to Review Spending
Ministries, Departments and Agencies will be required to reassess their programmes and spending plans before the final budget allocations are made.
They have also been directed to review externally funded projects and restructure spending where necessary to align with government priorities.
The Treasury says available resources will be directed towards programmes with the potential to create jobs, support private sector growth and improve services to citizens.
Sector Working Groups will scrutinize proposed programmes and projects before final allocations are made.
The spending ceilings for 2027/28 will also provide the basis for the preparation of the 2027 Budget Policy Statement.
2027 Budget Process Brought Forward
The 2027/28 budget is also being prepared under a revised budget calendar.
Treasury says the change is intended to allow the budget process to be completed ahead of the 2027 General Elections.
Ministries, Departments and Agencies, Sector Working Groups and other stakeholders will be required to follow the revised timelines for submitting policy documents, reports and proposed legislation.
The earlier timetable is expected to allow the government to complete the approval and implementation stages of the budget before the elections.
The figures remain projections at this stage and will go through the budget-making process before the final 2027/28 estimates are approved.
The Treasury has invited members of the public and other stakeholders to submit comments on the Draft Budget Review and Outlook Paper by August 19, 2026.
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