Kenya’s Treasury has widened its budget deficit by 28% just two months into the current fiscal year as the government grapples with stabilizing its strained public finances. Treasury Secretary John Mbadi revealed that the projected budget gap has risen to 767 billion shillings (GH¢93.4 billion) for the year ending June 2025. Mbadi shared these figures at an event in Nairobi on Monday, marking the beginning of the budget-preparation process.
The revision follows a series of deadly anti-government protests that forced President William Ruto’s administration to withdraw a set of controversial tax measures that would have generated around $2.7 billion (GH¢43.2 billion) in revenue. “The government is operating under a constrained fiscal environment,” Mbadi said, highlighting the challenges the new budget faces. He noted that Kenya is “barely managing” its 2024-25 fiscal plan.
The government has been under pressure to boost tax collection and reduce borrowing as part of a $3.6 billion (57.6) funding programme agreed with the International Monetary Fund (IMF) in 2021 to address the country’s growing debt issues. Kenya has revised its budget-deficit forecasts several times, initially aiming for a reduction to 3.3% of gross domestic product (GDP) before raising it to 4.3% of GDP.
Kenya’s financial strain stems from a combination of poor revenue collection, mounting debt repayments, and outstanding bills from the previous fiscal year, which continue to put pressure on the government’s resources. Mbadi warned that the situation may worsen, with a potential halt in operations for Kenya’s 47 counties due to the central government’s failure to disburse funds so far this fiscal year.
In addition to the fiscal challenges, Kenyan courts are currently reviewing the legality of a separate set of tax proposals, which, if blocked, could put another $1.7 billion in tax revenue at risk. Despite these hurdles, Mbadi indicated that the government plans to refine and reintroduce some of the less contentious tax measures that were previously shelved.
Earlier this year, Kenya’s credit rating was downgraded deeper into junk status by the three major credit-rating agencies, largely due to the go
