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On June 12, 2025, Treasury Cabinet Secretary John Mbadi delivered the Kenya Kwanza administration’s 2025/26 budget at the Parliament Buildings in Nairobi. Marking his first budget as Finance Minister, Mbadi laid out a KSh 4.2 trillion financial blueprint aimed at balancing fiscal discipline with social and economic development. The budget outlines government priorities, revenue expectations, and borrowing strategies amidst a tightening global and domestic economic landscape.
The overall fiscal approach reflects President William Ruto’s push for reduced debt reliance, improved tax compliance, and reallocation of resources to key sectors such as infrastructure, health, and education.
The government aims to collect KSh 2.7 trillion in taxes, which accounts for roughly 64% of the entire budget. In addition, it expects KSh 560 billion in revenue through levies, charges, and Appropriations-in-Aid. These revenue streams bring the total projected collections to KSh 3.3 trillion.
Despite this, the budget leaves a financing shortfall of approximately KSh 876 billion. To bridge this gap, the government will borrow KSh 592 billion domestically and KSh 284 billion from external sources. While the budget reflects an effort to reduce reliance on debt, borrowing remains crucial to meeting fiscal obligations.
The 2025/26 budget demonstrates a strong emphasis on sectors that can catalyze inclusive growth and improve service delivery:
-Education: With an allocation of KSh 701 billion, education remains the highest-funded sector. The funds will cover teacher recruitment, free day secondary education, tertiary institutions, and expansion of Technical and Vocational Education and Training (TVET) colleges.
-Health: KSh 138 billion has been set aside for primary healthcare expansion, universal health coverage implementation, and infrastructure development in national referral hospitals.
-Housing and Urban Development: The affordable housing program receives KSh 128 billion, underscoring the administration’s commitment to addressing urban migration and unemployment through construction-based job creation.
-Roads and Infrastructure: A total of KSh 217 billion will go toward road construction, rehabilitation, and maintenance, particularly in rural and underserved regions.
-Counties: A total of KSh 436.7 billion has been earmarked for county governments, enabling localized service delivery and devolution of development initiatives.
In response to public backlash from last year’s controversial tax proposals, the government has refrained from introducing new taxes in this year’s budget. Instead, Treasury has emphasized strengthening tax compliance and closing existing loopholes.
Notable revenue-enhancing measures include:
-A reduction in the digital asset tax from 3% to 1.5%
-Introduction of a 100% capital allowance for income tax purposes
-Rationalization of fringe benefit tax regulations
These strategies aim to broaden the tax base without inflaming public discontent or stifling business activity.
One of the key messages from Mbadi’s address was the government’s commitment to keeping the fiscal deficit under control. The 2025/26 fiscal deficit is projected at 4.5% of GDP, a notable reduction from previous years.
This move is designed to reassure investors and international lenders such as the IMF and World Bank, from whom Kenya expects continued support. The Treasury is also planning to tap international bond markets cautiously, while seeking infrastructure-specific financing backed by fuel levies and other guarantees.
John Mbadi’s first national budget as Treasury CS positions the Kenya Kwanza administration as focused on restoring economic confidence while addressing social priorities. With strategic allocations to health, education, infrastructure, and county governments, the 2025/26 budget reflects a recalibration of government priorities toward economic resilience and service delivery.
While debt still plays a role, Kenya is treading carefully by resisting the temptation to impose fresh taxes and instead emphasizing tax efficiency, legal reform, and digital integration in revenue collection.
The months ahead will test the effectiveness of these policies and the government’s ability to maintain both fiscal discipline and public satisfaction.
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