The government has unveiled a record KSh 4.84 trillion budget for the 2026/2027 financial year, setting the stage for renewed debate over public spending, taxation, and the rising cost of living.
Presenting the budget, Treasury Cabinet Secretary John Mbadi defended the spending plan as necessary to sustain economic growth and fund key government priorities. However, the proposal has drawn scrutiny from businesses, economists, and civil society groups concerned about its funding model and potential impact on ordinary Kenyans.
The budget is the largest in Kenya's history and is anchored on projected revenues of KSh 3.67 trillion, including KSh 2.9 trillion expected from ordinary tax collections. Despite the ambitious revenue targets, the government still faces a fiscal deficit of approximately KSh 1.2 trillion.
To bridge the gap, the Treasury plans to rely heavily on domestic borrowing, with KSh 995.7 billion expected to come from the local market. This means nearly 90 percent of the budget shortfall will be financed through borrowing from domestic lenders.
While the Treasury has emphasized that it has avoided broad-based income tax increases, concerns remain over the government's strategy to raise additional revenue through targeted tax measures. Among the proposals is a controversial 25 percent excise duty on mobile phones, part of efforts to generate an additional KSh 120 billion in revenue.
The move comes against the backdrop of growing public resistance to new taxes following months of economic hardship and concerns over the affordability of basic goods and services. Treasury officials argue that the targeted approach is designed to increase revenue without placing excessive pressure on workers and households through major income tax adjustments.
However, critics warn that the government's heavy dependence on domestic borrowing could have unintended consequences for the broader economy. Economists caution that large-scale borrowing from local financial institutions may crowd out private sector lending, making it more difficult and expensive for businesses and individuals to access credit.
Business groups have also questioned the sustainability of the government's revenue projections, citing a challenging economic environment shaped by global geopolitical tensions and slower-than-expected growth. The Treasury has already introduced relief measures such as reducing Value Added Tax on fuel and considering adjustments to Pay As You Earn (PAYE) deductions to cushion workers and consumers.
Analysts argue that if revenue collections fall short of expectations, the government could face pressure to introduce additional tax measures during the financial year, reigniting concerns about tax fatigue among citizens and businesses.
Source Attributed: The Standard