Despite revenue shortfalls, Kenya plans to increase government spending

  • The Kenyan National Treasury has proposed that the government increase government spending.
  • This is despite the fact that Kenya has failed to meet some of its revenue targets. 
  • The National Treasury has based its proposal on the promise of an anticipated increase in tax revenue. 

Based on an anticipated rise in tax collections, Kenya’s National Treasury proposes to boost government spending by 15.9% percent to Ksh3.66 trillion (about $29.2 billion) in the next fiscal year. However, the Kenya Revenue Authority (KRA) needs to catch up to existing goals, according to the most recent numbers.

The government intends to boost the budget to $40.5 billion by 2026, as evidenced by the draft medium-term national Budget Policy Statement presented this past week, which is supported by anticipated steady growth in tax revenue.

The statement reads in part; “revenue performance will be underpinned by the ongoing reforms in tax policy and revenue administration measures geared towards expanding the tax base.”

At the same time, the Kenyan Treasury claims it plans to reduce the fiscal deficit from $6.6 billion (5.7% of GDP) in 2022–2023 to $5.7 billion (4.4% of GDP) in the next fiscal year, and further to around 3.6% of GDP by 2026 as the country’s output increases.

This is anticipated to result in a continuous decline in debt financing, as well as a trend toward domestic borrowing and loans with favorable terms rather than foreign loans, whose servicing costs have recently increased.

Yet, achieving tax revenue and treasury securities targets has become increasingly difficult, casting doubt on the viability of the goals established for the upcoming fiscal year and the longer term.

The Kenyan Revenue Authority collected $7.8 billion (Ksh985 billion) in the first half of this fiscal year, falling short of the goal by around $342 million, according to data from the National Treasury.

Despite this, the newly proposed supplementary budget was revised upward, and revenue estimates for the time were set at $20.1 billion. This implies that KRA would need to raise nearly twice as much money in the upcoming months as it did in the first half of the year.


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