Who Wins, Who Loses & What It Means
Kenya’s government has presented an ambitious KSh 4.29 trillion budget for the 2025/26 fiscal year, designed to advance economic recovery under the Bottom-Up Economic Transformation Agenda (BETA). Delivered by Treasury Cabinet Secretary John Mbadi, this budget prioritizes education, security, infrastructure, and economic development. It also demonstrates fiscal discipline amidst a challenging economic landscape. Below, we dissect the key components of the budget, the winners, the losers, and what it means for ordinary Kenyans.
Winners: The Top Beneficiaries of the Budget
1. Education Sector
The education sector emerges as the largest winner, with a staggering KSh 702.7 billion allocated. Highlights include:
- Teachers Service Commission (TSC): Receives KSh 387.2 billion to hire, train, and remunerate teachers.
- Free Primary and Secondary Education: Allocated KSh 58.9 billion to support Kenya’s universal education program.
- Higher Education Loans Board (HELB): Allocated KSh 58.5 billion to provide loans and scholarships for students in tertiary institutions.
2. National Security
National security is the second-largest beneficiary, receiving KSh 464.9 billion. This funding will enhance the capacity of the Kenya Defence Forces, National Police Service, and the National Intelligence Service to bolster the country’s safety and stability.
3. Infrastructure Development
The government continues to prioritize infrastructure, targeting roads, railways, ports, and energy projects to spur economic growth. Investments in ICT and the creative economy also feature prominently, aligning with BETA’s goals of job creation and innovation.
4. County Governments
Devolution remains a key focus, with county governments receiving KSh 436.7 billion to fund local projects and improve service delivery. Additionally, KSh 10.6 billion is allocated to the Equalisation Fund, aimed at supporting marginalized areas.
5. Contingency Fund
The Kenya’s budget allocates KSh 5 billion to the Contingency Fund to address emergencies such as droughts, floods, and other natural disasters.
Losers: Sectors Facing Austerity
1. No New Taxes, But Austerity Measures
While the government refrained from introducing new taxes to avoid public backlash, austerity measures are evident. Spending cuts target non-priority areas as the government seeks to tighten fiscal discipline.
2. Debt Management Strain
With a fiscal deficit of KSh 831 billion (~4.3% of GDP), the government plans to borrow KSh 923.2 billion to bridge the gap. Domestic borrowing will account for KSh 635 billion, while KSh 287 billion will come from external sources. This heavy borrowing adds pressure to Kenya’s already strained debt portfolio, which stands at approximately 66% of GDP.
3. Public Services Beyond Priorities
Sectors not identified as priorities under BETA, such as non-critical public services, face reduced funding. This could lead to slower progress in areas outside education, security, and infrastructure.
Budget Highlights and Fiscal Discipline
1. Revenue Projections
The government aims to collect KSh 3.39 trillion in revenues, driven by efforts to expand the tax base and enhance compliance. However, achieving this ambitious target remains a challenge in a sluggish economy.
2. IMF Engagement and Reforms
Kenya continues to engage with the International Monetary Fund (IMF) to secure additional funding. Compliance with IMF-mandated reforms, including reducing the fiscal deficit and improving public debt management, remains a priority.
3. Deficit Reduction Goals
The fiscal deficit is projected to decline from 5.1% to 4.5% of GDP, reflecting the government’s commitment to fiscal prudence. However, this will require careful expenditure management and enhanced revenue collection.
Implications for Kenyans
1. Education Gains
Improved funding for education promises better learning environments, more teachers, and expanded access to higher education loans. These investments could significantly uplift literacy and skill levels in the country.
2. Enhanced Security
Increased funding for security agencies will strengthen law enforcement and national safety, fostering a conducive environment for economic activities.
3. Economic Growth Potential
Investments in infrastructure and economic sectors are expected to stimulate job creation and improve livelihoods. However, successful implementation remains critical.
4. Debt Sustainability Concerns
Heavy borrowing poses a long-term risk to fiscal sustainability. Future budgets may face tighter financial space, potentially affecting public services and social programs.
5. Taxpayer Impact
While no new taxes have been introduced, efforts to widen the tax net may impact individuals and businesses operating in the informal and digital economies.
Read: Kenya’s 2025/26 Ksh 4.2 Trillion Budget
Challenges and Opportunities
Kenya’s 2025/26 budget is a strategic roadmap that seeks to balance competing demands. The focus on priority sectors like education, security, and infrastructure is commendable. However, challenges such as debt sustainability, revenue shortfalls, and effective implementation of austerity measures loom large.
Opportunities exist in leveraging public-private partnerships (PPPs) to fund infrastructure and social programs. Additionally, adopting innovative tax compliance strategies could help achieve revenue targets without imposing new levies.
Conclusion
Kenya’s KSh 4.29 trillion 2025/26 budget presents a bold vision for economic recovery and transformation. By prioritizing education, security, and infrastructure, the government seeks to address pressing needs while laying the foundation for long-term growth. However, its success will depend on disciplined execution, enhanced transparency, and sustained stakeholder engagement. As Kenya embarks on this ambitious fiscal journey, citizens must remain vigilant, ensuring that promises translate into tangible benefits for all.
