Kenya Projects Steady Growth Amid Economic Risks in 2025/26 Budget
The fiscal deficit is projected to shrink to 4.8% of GDP, down from 5.7% in 2024/25.Mbadi said the budget prioritizes boosting revenue without introducing new taxes, a departure from previous years.
Treasury Cabinet Secretary John Mbadi. Photo/Parliament.
By Robert Assad
Kenya’s economy is forecast to grow by 5.3% in both 2025 and 2026, driven by a stable macroeconomic environment, Finance Minister John Mbadi told parliament on Thursday while presenting the 2025/26 fiscal budget.
The proposed budget totals Ksh4.29 trillion ($33.27 billion) and aims to balance economic growth with fiscal discipline, as the government grapples with high debt levels and public unrest.
The fiscal deficit is projected to shrink to 4.8% of GDP, down from 5.7% in 2024/25.Mbadi said the budget prioritizes boosting revenue without introducing new taxes, a departure from previous years.
“For the first time, we have not added taxes in the current finance bill,” he said, referencing widespread protests in 2024 that forced the government to abandon Ksh346 billion ($2.7 billion) in planned tax hikes.
Despite the government’s effort to avoid direct tax increases, critics argue the budget shifts the burden through indirect taxes and increased powers for the tax authority, including access to bank and mobile money data.
Mbadi defended the move, saying tax compliance is essential for running the country.The budget comes amid heightened tensions in Nairobi, where protests flared following the death of a political blogger in police custody.
Demonstrators clashed with police, who used tear gas as vehicles were set ablaze.Kenya’s public debt remains a key concern, with the debt-to-GDP ratio hovering around 66%, well above the 55% threshold considered sustainable.
To close the funding gap, the government plans to widen the tax base, enhance compliance, and reduce spending.“Despite these plans, we’re still likely to see a significant funding shortfall,” said John Kuria, a tax specialist at Kody Africa.
Shani Smit-Lengton, Senior Economist at Oxford Economics Africa, noted that while the budget outlines credible steps to reduce the deficit, weak implementation could undermine progress. Kenya often revises budgets mid-year, affecting fiscal credibility.
In March, Kenya applied for a new lending program from the International Monetary Fund after exiting its previous agreement before the final review.
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