Kenyan government spending runs KSh 154 billion over target by end-August, Treasury draft shows; budget statement due in Parliament by 16 November

Kenya's government spending and net lending reached KSh 746.6 billion in the first two months of the 2026/27 financial year, KSh 154.0 billion above the target of KSh 592.6 billion, according to the National Treasury's Draft 2027 Budget Policy Statement. Total revenue, including Ministerial Appropriation-in-Aid (revenue collected by ministries), was KSh 488.9 billion by the end of August 2026, against a target of KSh 516.9 billion.

The Statement attributes the overspending largely to higher-than-targeted disbursements for recurrent spending, development spending and transfers to county governments. The fiscal deficit including grants for the period was KSh 252.0 billion against a targeted KSh 73.5 billion, and the Government has revised its 2026/27 fiscal projections.

Ordinary revenue, which excludes Appropriation-in-Aid, was KSh 383.9 billion against a target of KSh 421.8 billion, with income tax and value added tax (VAT) below target by KSh 14.4 billion and KSh 12.6 billion respectively.

Under a revised calendar, the Statement is to go to Cabinet by 30 October 2026 and to Parliament by 16 November 2026, and the budget process is expected to be concluded by March 2027, ahead of the August 2027 General Elections. Ordinarily the approved Statement reaches Parliament by 15 February.

For 2027/28, the draft projects a fiscal deficit including grants of KSh 1,352.9 billion, or 5.9 per cent of GDP, against a projected KSh 1,145.2 billion (5.5 per cent) in 2026/27.

The 208-page document is dated October 2026 and the foreword is signed by Cabinet Secretary John Mbadi Ng'ongo. It sets the framework for the 2027/28 budget and the medium-term budget.

A Budget Policy Statement lists the national government's priorities and proposed spending ceilings, including those of Parliament and the Judiciary, and the indicative transfers to the 47 county governments. Section 25 of the Public Finance Management Act provides for the Treasury to prepare it and submit it to Cabinet for approval before Parliament considers it. Public sector hearings for this Statement were held on 9, 12 and 13 October 2026.

Total revenue including Appropriation-in-Aid is projected at KSh 4,003.7 billion, or 17.4 per cent of GDP, in 2027/28, against a projected KSh 3,630.6 billion, also 17.4 per cent of GDP, in 2026/27. Ordinary revenue is projected at KSh 3,249.2 billion (14.2 per cent of GDP), up from a projected KSh 2,985.7 billion (14.3 per cent).

Overall expenditure and net lending is projected at KSh 5,415.5 billion, or 23.6 per cent of GDP, compared with KSh 4,819.4 billion (23.2 per cent) projected for 2026/27. The 2027/28 figure is made up of recurrent spending of KSh 4,021.1 billion (17.5 per cent of GDP), development spending of KSh 915.8 billion (4.0 per cent), transfers to county governments of KSh 473.5 billion and KSh 5.0 billion for the Contingency Fund.

The 2027/28 deficit is to be financed with 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). The deficit is projected to fall 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.

Growth was 5.1 per cent in both the first and second quarters of 2026 and is projected at 5.0 per cent in 2026 and 5.1 per cent in 2027. The 2026 projection is down from 5.3 per cent in the 2026 Budget Policy Statement; the Statement attributes the cut to the Middle East conflict, particularly higher energy prices and supply-chain disruptions. Inflation was 6.8 per cent in September 2026, within the Government's target band of 2.5 per cent to 7.5 per cent.

The Government has proposed a KSh 68.0 billion provision in 2026/27 to settle verified pending bills owed to suppliers and contractors, with priority for claims of up to KSh 100 million. Of the claims recommended for settlement, KSh 155.3 billion in verified bills outside the roads sector remains outstanding.

The Cabinet Secretary for the National Treasury must take the resolutions of Parliament into account in finalising the 2027/28 budget.