Kenya’s National Treasury has raised fresh concerns over the country growing budget deficit, warning that increased reliance on borrowing could undermine fiscal stability and long term economic growth.
Treasury has warned that the budget deficit has widened to KSh1.12 trillion, reflecting a growing gap between revenue and expenditure amid rising spending pressures and slow revenue growth.
Appearing before the National Assembly Public Debt and Privatisation Committee, Treasury Principal Secretary Chris Kiptoo said the figure marks a sharp increase from KSh901 billion approved in the June 2025 budget.
Kiptoo cautioned that continued borrowing to finance the deficit is becoming unsustainable without urgent fiscal reforms.
“Borrowing is not sustainable. Without meaningful fiscal consolidation, it will be very difficult going forward,” Kiptoo told the committee.
The government has increasingly relied on debt to fund its operations, raising concerns among economists about long term fiscal risks and economic stability.
Fiscal pressure grows as borrowing rises
Kiptoo said there is an urgent need to broaden the tax base, noting that the burden currently falls heavily on compliant taxpayers while many remain outside the tax net.
“We want taxation to be more equitable. Those complying are shouldering the load, while many others are yet to come on board,” he said.
The Treasury is pursuing fiscal consolidation measures aimed at stabilising public finances while sustaining development priorities. This includes strengthening Kenya Revenue Authority to enhance tax compliance and boost collections.
Under current projections, the government plans to finance most of the deficit through domestic borrowing estimated at KSh924.5 billion, alongside KSh229.8 billion from external sources.
Economists warn that heavy domestic borrowing could crowd out private sector credit, as government demand competes with businesses for available funds, potentially slowing investment and economic activity.
External borrowing, though lower, continues to add to Kenya debt stock, raising concerns about increasing debt servicing costs.
Lawmakers, led by committee chair Abdi Shurie, blamed the rising public debt on what they termed as fiscal indiscipline, particularly the tendency to overestimate revenues.
“When revenues are not increasing, why continue expanding expenditure?” Shurie asked.
Kiptoo also pointed to rising recurrent expenditure, including an increase in the public wage bill driven by higher salaries and benefits for constitutional and independent offices.
Allocations for salaries and allowances are projected at KSh5 billion, up from KSh4.6 billion, largely due to the implementation of the third remuneration review cycle and gratuity payments for outgoing state officers.
Meanwhile, the pensions budget is expected to remain unchanged at KSh234 billion.
The growing deficit is expected to pile pressure on the government to rein in spending, improve revenue mobilisation and reduce reliance on borrowing to safeguard economic stability.
