Kenya’s National Treasury is facing deepening pressure as the country’s budget grapples with weak revenue collection and high debt repayments. In the first quarter of the 2025/26 fiscal year, the Kenya Revenue Authority (KRA) missed its revenue target by a substantial KSh 90 billion, collecting KSh 657.17 billion against a target of KSh 707.03 billion. This underperformance, primarily due to a KSh 90 billion shortfall in ordinary revenue, has significantly strained fiscal operations.
The revenue slump is attributed to widening compliance gaps, administrative inefficiencies, and revenue-reducing measures under the Finance Act 2025, alongside slower activity in key economic sectors. This has pushed the first-quarter fiscal deficit to KSh 280.4 billion, well above the planned KSh 189.5 billion. This deficit represents 1.5% of GDP for the quarter.
To bridge this widening gap, the Treasury recorded net borrowing of KSh 437.8 billion in the first quarter of the 2025/26 fiscal year. This includes KSh 339.7 billion sourced from the domestic market and KSh 98.1 billion from external lenders. This borrowing already accounts for 48.6% of the annual borrowing target of KSh 901 billion.
Treasury Principal Secretary Chris Kiptoo emphasized the challenging task of generating sufficient revenue for priority expenditures while honoring debt commitments, stating, “We really need to focus on fiscal sustainability.”
Kenya’s public debt reached KSh 12.06 trillion by September 2025, with domestic debt at KSh 6.66 trillion and external debt at KSh 5.39 trillion. The government plans to narrow its budget deficit to 4.9% of GDP in the 2026/27 financial year, but concerns remain about the feasibility of ambitious revenue-raising plans.
