The Cabinet has sanctioned a Ksh4.2 trillion budget for the 2025/26 financial year, slashing some Ksh153 billion.
According to a Cabinet dispatch released on Tuesday, February 11, the government has allocated Ksh3.09 trillion for recurrent expenditure, Ksh725.1 billion for development projects, Ksh436.7 billion in county transfers, and a Ksh5 billion provision for the Contingency Fund.
The National Treasury had earlier projected a total budget of Ksh4.485.7 billion for the 2025/26 financial year, marking a notable rise from the Ksh3.94 trillion allocated in the 2024/25 financial year.
The budget statement, now poised for parliamentary consideration, points to the government's commitment to sustaining economic growth and ensuring fiscal stability.
Under the Division of Revenue Bill 2025, the National Government proposes a shareable revenue of Ksh2.8 trillion. Of this, Ksh405.1 billion is earmarked for county governments as an equitable share, with an additional Ksh10.6 billion allocated to the Equalisation Fund.
This county allocation represents 25.8 per cent of the most recent audited revenue, amounting to Ksh1.57 trillion from the 2020/21 financial year, aligning with constitutional mandates. The County Allocation Revenue Bill 2025 will distribute these funds based on the Third Basis Formula.
Furthermore, the County Government Additional Allocation Bill 2025 proposes an extra Ksh69.8 billion—Ksh12.89 billion from the National Government and Ksh56.91 billion from development partners. Consequently, total county transfers for 2025/26 will reach Ksh474.87 billion.
The 2025 Budget Policy Statement (BPS) articulates the government's economic priorities, focusing on sustaining growth, ensuring fiscal stability, and promoting inclusive green development.
Under the Bottom-Up Economic Transformation Agenda, GDP growth rebounded to 5.6 per cent in 2023, up from 4.9 per cent in 2022, driven by a strong recovery in agriculture after two years of drought.
Economic growth is projected to remain stable at 5.3 per cent in 2025 and 2026, supported by increased agricultural productivity, a resilient services sector, and strategic government interventions.
The government has outlined six key priorities: reducing the cost of living, eradicating hunger, creating jobs, expanding the tax base, improving foreign exchange balances, and fostering inclusive growth.
According to the Cabinet dispatch, the government's fiscal policy for 2025/26 prioritises fiscal consolidation to reduce debt vulnerability while ensuring adequate funding for essential public services. This will be achieved through expenditure rationalisation, revenue mobilisation, and enhanced tax compliance.
The Medium-Term Revenue Strategy will guide tax reforms, ensuring efficiency, fairness, and progressivity while balancing revenue generation with social protection. Key measures include expanding the tax base, leveraging technology for tax efficiency, sealing revenue loopholes, and maximising non-tax revenues from ministries, departments, and agencies.
Public finance management will be strengthened through zero-based budgeting, a transition to accrual-based accounting, and the adoption of the Treasury Single Account to improve cash flow management. The government will also fully operationalise the Integrated Financial Management Information System (IFMIS) asset inventory management modules and scale up public-private partnerships (PPPs) to enhance private sector involvement in public service delivery.
