Kenya’s government plans to use Safaricom PLC and the Kenya Pipeline Company (KPC) to fund its Sh4.24 trillion budget for the 2025/26 fiscal year. This move aims to reduce debt reliance while boosting economic growth under the Bottom-Up Economic Transformation Agenda (BETA).
The Budget Challenge
The Sh4.24 trillion budget represents a massive undertaking, creating a projected deficit of Sh695 billion, or 4.8% of GDP. Historically, the government has plugged deficits by borrowing. However, public debt, now at Sh10.2 trillion, has pushed the government to seek new strategies.
Finance Minister John Mbadi recently outlined plans to sell stakes in state-owned firms, including Safaricom and KPC, to generate the needed funds.
Why Safaricom is Key
As Kenya’s largest telecom firm, Safaricom is crucial to the budget strategy.
- A Revenue Giant
Safaricom controls more than 65% of Kenya’s telecom market and earns billions annually, largely from M-PESA. In the 2023/24 fiscal year, Safaricom made over Sh74 billion in profit. - Government Ownership
The government owns 35% of Safaricom, worth approximately Sh350 billion. Selling a portion of this stake could raise billions for the budget. - Capital Market Growth
When Safaricom launched its IPO in 2008, it raised Sh50 billion and attracted thousands of new investors. A similar move today could deepen the Nairobi Securities Exchange (NSE) and attract fresh investments.
Kenya Pipeline Company’s Role
KPC’s contributions, while quieter, remain significant.
- Stable Revenue Streams
KPC earns consistent income by transporting petroleum products across the region, making it a dependable investment. - Privatization Potential
Listing KPC on the NSE could attract both local and foreign investors. A partial stake sale could generate significant non-tax revenue for the government.
The Funding Strategy
The government’s plan involves multiple steps:
- Parliamentary Approval
Parliament will review and approve the stake sales by the third quarter of 2025. - Valuation and Listing
Independent valuation of Safaricom and KPC shares will ensure transparency. The shares will then be floated on the NSE. - Revenue Allocation
The proceeds will be used to reduce the deficit, finance development projects, and ease the public debt burden.
Benefits of the Plan
This strategy offers several advantages:
- Immediate Funds
Selling stakes in Safaricom and KPC provides a quick revenue boost. - Debt Reduction
By relying on non-tax revenue, Kenya can reduce its borrowing and related costs. - Market Expansion
Listing KPC and selling more Safaricom shares will increase liquidity on the NSE and attract more investors.
Challenges to Address
Despite the potential, some risks exist:
- Undervaluation
Market conditions could lead to undervalued asset sales. - Future Revenue Loss
The government risks losing dividends from these profitable entities. - Public Backlash
Privatization often faces criticism, with concerns about losing control of national assets.
Read: Finance Bill 2025 Tax Reforms and Economic Implications
Economic Implications
This strategy represents more than a budget solution—it signals a policy shift. By reducing its control over commercial entities, the government hopes to stimulate private sector growth and attract investments.
President William Ruto’s administration aims to leverage private sector efficiency while focusing on governance and public service delivery. If successful, this plan could position Kenya as a leader in innovative public finance management.
Conclusion
Using Safaricom and KPC to fund Kenya’s Sh4.24 trillion budget demonstrates bold, innovative fiscal planning. The approach reduces debt reliance while tapping into the value of state assets.
However, success depends on transparency, public trust, and proper use of the funds. If managed well, this strategy could strengthen Kenya’s economy, reduce its debt burden, and inspire similar initiatives across Africa.
