Kenya’s Auditor-General has raised concerns about the government’s proposed Sh4.3 trillion budget for the 2025/26 financial year.
She warns that the budget is not aligned with expected revenue streams and could push the country into excessive borrowing.
This means the government may have to rely heavily on loans to finance its expenditure, which could worsen the country’s debt situation.
The 2025 Budget Policy Statement projects that Kenya will collect about Sh2.8 trillion in revenue. While this figure is higher than the Sh2.6 trillion expected in the 2024/25 financial year, it still falls short of the recommended tax-to-GDP ratio.
The World Bank advises that a country should have a tax revenue of at least 15% of its GDP, but Kenya’s projections remain below this threshold. This raises doubts about whether the government’s revenue targets are realistic, especially given past trends where the Kenya Revenue Authority (KRA) has consistently missed its collection targets.In previous financial years, the government has struggled to meet its revenue targets.
In 2023/24, it aimed to collect Sh2.5 trillion but only managed Sh2.3 trillion, leading to a shortfall of Sh170.4 billion. Similarly, in 2022/23, the target was Sh2.2 trillion, but actual revenue stood at Sh2.1 trillion, missing the target by nearly Sh100 billion.
These shortfalls indicate that revenue estimates have often been overly ambitious, forcing the government to borrow more than planned.
With the budget increasing to Sh4.3 trillion from the previous year’s Sh3.978 trillion, the Auditor-General warns that if revenue collection continues to fall short, the government will have no choice but to borrow to bridge the gap. This would further strain public finances, increasing Kenya’s debt burden.
The rising debt levels have been a major concern for economic experts, who argue that continued borrowing could put the country in a difficult financial position, where a big portion of revenue goes towards repaying loans rather than funding development projects.
To avoid this situation, the Auditor-General is advising the National Treasury to adopt a more cautious approach when making revenue projections.
Instead of setting unrealistic targets, projections should be based on past performance and current economic conditions. This would help create a budget that is more realistic and reduces the need for excessive borrowing.
The government has stated that its fiscal policy for the 2025/26 financial year is focused on reducing debt and promoting economic growth. However, if revenue expectations are not met and borrowing increases, these goals may not be achieved.
A sustainable budget requires careful planning to ensure that spending matches available resources without relying too much on debt.
Given these concerns, policymakers must review the proposed budget carefully. If spending plans are not adjusted to reflect realistic revenue figures, the country may find itself in a worse financial position.
Borrowing to cover budget deficits is not a sustainable solution in the long term, and the government must find ways to increase revenue without overburdening taxpayers.Transparency and accountability in managing public finances will be critical in the coming years.
The Auditor-General’s warning highlights the need for responsible budgeting to ensure economic stability. The government must take these concerns seriously and make necessary adjustments to prevent a situation where debt repayment takes priority over national development.
It is essential to strike a balance between ambitious development plans and financial reality. The proposed Sh4.3 trillion budget must be carefully examined to avoid pushing Kenya into a deeper debt crisis.
The focus should be on ensuring that revenue targets are achievable and that spending is managed responsibly to safeguard the country’s economic future.
