NAIROBI, Kenya, Mar 10 – Lawmakers have approved the 2026/2027 Budget Policy Statement (BPS), setting the stage for the preparation of the national budget and defining government spending priorities for the coming financial year.
The Sh4.7 trillion framework provides the fiscal blueprint for national, county, and sectoral allocations. The approval followed deliberations by the Budget and Appropriations Committee, which recommended ceilings consistent with fiscal responsibility principles.
The House approved a National Government budget ceiling of Sh2.8 trillion, with the majority allocated to the Executive at Sh2.7 trillion to fund key policy initiatives, including the Bottom-Up Economic Transformation Agenda.
Within this allocation, the Office of the Auditor General has been allocated Sh9.03 billion, while Parliament and the Judiciary will receive Sh50.78 billion and Sh30.44 billion, respectively.
In the share allocation to counties, the Equitable Share is set at Sh420 billion. The Equalization Fund will receive KSh 9.6 billion, and additional allocations to county governments total Sh75.7 billion.
The National Treasury has also set aside Sh4 billion to support public participation initiatives, reinforcing efforts to involve citizens in the budget process.
Revenue Projections
Total projected revenue for FY 2026/27, including Appropriations-in-Aid, is Sh3.59 trillion, equivalent to 17.1 percent of GDP, an increase of KSh 219.5 billion from the previous year.
Ordinary revenue is expected to contribute Sh147 billion of this growth, driven by all major tax heads, including income tax, import duties, excise duties, and other tax revenues.
Despite these projections, the Committee noted a Sh148 billion shortfall in actual revenue collection as of December 2025, signaling potential pressure on the fiscal deficit if spending is not carefully managed.
The deficit, including grants, is projected at Sh1.15 trillion (5.5% of GDP) to be financed through Sh225.5 billion in external loans and KSh 924 billion in domestic borrowing.
Increased Expenditure
Total expenditure and net lending for FY 2026/27 are projected at KSh 4.738 trillion, an increase of KSh 435.7 billion from the previous fiscal year.
Recurrent expenditure will rise by Sh322.8 billion, development expenditure by Sh102.2 billion, and transfers to counties by Sh10.7 billion. Recurrent costs include Sh137 billion for operations and maintenance, Sh105 billion for domestic interest payments, and Sh63 billion for salaries and wages.
The Committee expressed concern that rising interest payments, now over 25 percent of the budget, continue to constrain resources for essential services and development initiatives.
The Education sector will see the largest increase of Sh64.2 billion, supporting teacher resource management and university education in line with ongoing Competency-Based Education and Training reforms. The infrastructure sector has been allocated an additional Sh59.9 billion to fund rail and road transport, housing, metropolitan development, and other key projects.
The Committee also warned that overreliance on domestic borrowing could crowd out credit to the private sector, limiting financing for MSMEs, investment, and job creation. Low absorption rates of development funds were highlighted as a persistent challenge, potentially slowing progress despite higher budgetary allocations.
