Kenya's draft 2027 budget statement: KSh 1,917.6bn for debt, deficit KSh 1,352.9bn

Kenya's National Treasury proposes KSh 1,917.6 billion for public debt costs in the 2027/28 financial year, up from KSh 1,797.1 billion in 2026/27, according to its Draft 2027 Budget Policy Statement, dated October 2026. The draft projects a fiscal deficit including grants of KSh 1,352.9 billion, or 5.9 per cent of GDP.

The Budget Policy Statement is the document that sets spending priorities and ceilings before the budget itself is drawn up. Because the general election is scheduled for August 2027, the Treasury has brought the calendar forward: the statement is scheduled to go to Cabinet by 30 October 2026 and to Parliament by 16 November 2026, instead of the usual 15 February. The budget process is to be concluded by March 2027.

The debt figure covers the annual redemption of debt and interest payments on domestic and external debt. The draft says interest payments take 42 per cent of ordinary revenue in 2026/27, up from 14.7 per cent in 2013/14.

The deficit for 2026/27 is projected at KSh 1,145.2 billion, or 5.5 per cent of GDP. The draft has the deficit falling to 5.4 per cent of GDP in 2028/29, 5.1 per cent in 2029/30 and 4.9 per cent in 2030/31.

As at the end of September 2026, overall revenue collection was below target, with a shortfall in ordinary revenue of KSh 58.2 billion. Ordinary revenue is projected at KSh 3,249.2 billion (14.2 per cent of GDP) in 2027/28, against KSh 2,985.7 billion (14.3 per cent) in 2026/27.

Total revenue, including Appropriation-in-Aid, is projected at KSh 4,003.7 billion in 2027/28, up from KSh 3,630.6 billion. Overall expenditure and net lending is projected at KSh 5,415.5 billion (23.6 per cent of GDP), compared with KSh 4,819.4 billion (23.2 per cent) in 2026/27.

Recurrent spending in 2027/28 is put at KSh 4,021.1 billion and development spending at KSh 915.8 billion.

In the first two months of 2026/27, to the end of August 2026, the fiscal deficit including grants was KSh 252.0 billion against a target of KSh 73.5 billion. Expenditure and net lending was KSh 746.6 billion against a target of KSh 592.6 billion; recurrent spending was KSh 101.7 billion above target, mainly because of higher domestic interest, pensions and other recurrent items.

Over the four years from 2022/23 to 2025/26, total revenue fell short of approved targets by an average of KSh 152 billion a year, of which KSh 142 billion was ordinary revenue.

The 2027/28 deficit of KSh 1,352.9 billion is to be financed by net external borrowing of KSh 423.8 billion (1.8 per cent of GDP) and net domestic financing of KSh 929.1 billion (4.0 per cent).

External financing is to come mainly from concessional and semi-concessional loans and grants from multilateral and bilateral development partners. Non-concessional borrowing is to be limited to projects with viable expected returns and the ceiling in the Medium-Term Debt Management Strategy.

The Treasury also plans to raise money through Samurai loans and bonds, Sukuk, Panda bonds and sustainability-linked financing, and to run liability-management operations (debt swaps, refinancing and buybacks) to smooth maturities. At home it will favour medium- and long-term Treasury bonds, with Treasury bills used mainly for short-term liquidity.

The present value of total public debt stood at 65.6 per cent of GDP in June 2026, against an anchor of 55±5 per cent. The draft says this calls for a primary surplus of at least 2.3 per cent of GDP each year.

The draft proposes KSh 455.8 billion for the counties in 2027/28, made up of an equitable share of KSh 440.9 billion and additional allocations of KSh 14.9 billion. Under those allocations, the national government would face a financing gap of KSh 291.6 billion, which the draft says would constrain national functions and require additional borrowing.

The Pending Bills Verification Committee, set up in November 2023, has analysed 91,911 claims valued at KSh 637.6 billion. It recommended 29,885 claims worth KSh 235.6 billion for settlement, of which KSh 80.3 billion has been paid through securitisation in the roads sector.

For 2026/27 the government has proposed a KSh 68.0 billion provision to pay verified bills owed to suppliers and contractors, with priority for claims of up to KSh 100 million.