NAIROBI, June 5, 2026 — The National Assembly has approved the 2026 Budget Policy Statement, locking in a Sh2.878 trillion spending framework for the 2026/27 financial year. The vote sets fiscal priorities ahead of the final budget, with the Executive taking the lion’s share, counties safeguarded at Sh420 billion, and the deficit maintained at 5.3% of GDP despite mounting debt pressure.
The BPS approval comes as Treasury balances three competing demands: funding development projects like housing and roads, meeting debt obligations with public debt nearing Sh13 trillion, and pushing fiscal consolidation to reassure investors. Education, security, and health remain top spenders, while Parliament ordered state agency reforms to cut waste.
Budget Split: Executive Sh2.797T, Counties Sh420B + Sh75.69B
The approved framework allocates resources across the three arms of government and devolved units:
1. Executive: KSh2.797 trillion — the largest share to run ministries, state departments, and national programs
2. Parliament: KSh50.78 billion for legislative functions
3. Judiciary: KSh30.44 billion for courts and justice services
4. Counties: KSh420 billion as equitable share of national revenue, plus KSh75.69 billion in additional allocations
5. Equalisation Fund: KSh9.6 billion for basic services in historically marginalized regions
County funding is expected to support healthcare, agriculture, water, local roads, and trade. The extra Sh75.69B allocation gives governors more room for devolved projects, while the Equalisation Fund targets counties that have lagged in infrastructure and services.
The BPS now serves as the blueprint for Treasury to draft detailed budget estimates before the full 2026/27 budget is tabled later this month.
Deficit Stays at 5.3% as Debt Servicing Bites
Parliament endorsed Treasury’s plan to hold the budget deficit at 5.3% of GDP. The target reflects continued fiscal consolidation — borrowing less while trying to sustain public investment.
The move comes as Kenya’s public debt approaches Sh13 trillion. Debt repayments now consume a growing chunk of revenue, limiting room for new spending. Treasury has argued that gradual consolidation is needed to protect macroeconomic stability and keep investor confidence.
Maintaining 5.3% means the government will still borrow, but at a slower pace than peak deficit years. Whether that’s enough to calm debt markets will depend on how much revenue Treasury can raise without triggering public pushback on taxes.
Security, Education, Housing & Health Dominate Spending
Sector allocations in the BPS show where government priorities lie:
Education leads recurrent spend: Teachers Service Commission gets KSh422.95 billion for salaries and recruitment. State Department for Basic Education: KSh134.78 billion. Higher Education and Research: KSh160.09 billion for universities, TVETs, and research.
Security: Ministry of Defence KSh241.36 billion. National Police Service KSh143.19 billion.
Infrastructure: Roads KSh232.11 billion. Housing and Urban Development KSh139.33 billion to fund President Ruto’s Affordable Housing Programme.
Health: Medical Services KSh134.3 billion. Public Health and Professional Standards KSh33.1 billion. Funds will support SHA rollout, hospitals, specialized care, and disease prevention.
The heavy tilt toward education and security is unchanged from past budgets. Housing and roads signal the administration’s focus on job creation and infrastructure, even with fiscal constraints.
Parliament Orders State Corporation Mergers, More Transparency
Beyond numbers, lawmakers attached policy directives to improve public finance management.
State agency rationalization: Treasury must merge or close non-viable state corporations by October 2026 to cut duplication and waste.
Exchequer transparency: Treasury directed to publish detailed releases for government programs so Parliament and citizens can track spending.
The reforms respond to years of audit queries about bloated parastatals and poor budget execution tracking. If implemented, they could free up billions currently lost to inefficiency.
Budget 2026/27 Foundation
The approval of the Budget Policy Statement marks a critical milestone in Kenya's budget-making process and comes at a time when debate over taxation, public debt and government spending remains intense.
With public participation on the Finance Bill 2026 having recently concluded amid widespread concerns over the cost of living, attention will now shift to how Treasury translates the approved spending ceilings into detailed budget estimates.
The final budget, expected later this month, will reveal how the government intends to finance its ambitious spending plans while managing debt pressures and responding to growing demands for economic relief from households and businesses.
