Kenya FY 2025/26 Financial Analysis

Summary

Kenya’s FY 2025/26 budget shows rising fiscal strain: revenue lags spending, deficits grow, and costly domestic borrowing dominates financing. Debt interest consumes 25% of revenue, crowding out development. With rigid recurrent costs, sustainability risks are high without urgent fiscal reforms.

Key Takeaways

• Revenue growth is weak and narrowly based, failing to keep pace with rising expenditure and pushing the fiscal deficit toward unsustainable levels above 6% of GDP.
• The government increasingly relies on domestic borrowing through securities, which is costly, highly concentrated, and riskier than foreign financing.
• Recurrent expenditure dominates the budget at over 80%, leaving limited resources for development and growth-oriented investments.