The Cabinet has endorsed the financial year 2026/27 Budget, setting total expenditure at Sh4.7 trillion against projected revenues of Sh3.53 trillion.
The allocations include Sh3.46 trillion for recurrent spending, Sh749.5 billion for development projects, Sh495.7 billion for transfers to county governments, and Sh2 billion for the Contingency Fund.
Under the Division of Revenue Bill, 2026, the Cabinet said county governments are set to receive Sh420 billion as an equitable share, representing 21.9 per cent of the most recent audited revenue in line with constitutional requirements, alongside Sh15.2 billion for the Equalisation Fund.
An additional Sh75.7 billion has also been proposed under the County Governments Additional Allocation Bill, 2026, bringing total transfers to Sh495.7 billion.
The Cabinet noted that the macroeconomic outlook remains positive, with GDP growth projected at 5 per cent in 2025 and 5.3 per cent in 2026, supported by favourable weather, improved agricultural productivity, climate-smart investments, and continued implementation of the Bottom-Up Economic Transformation Agenda.
The 2026 Budget Policy Statement, themed “Accelerating Gains under the Bottom-Up Economic Transformation Agenda for Inclusive and Sustainable Growth,” marks a shift from fiscal stabilisation to scaled-up investment aimed at driving the next phase of economic growth.
Priority investments have been focused on education, health, energy, infrastructure, agriculture, social protection, and national security, alongside reforms in public finance management, digitisation, State-owned enterprises, and public-private partnerships.
“The Budget Policy Statement, the fourth under the Kenya Kwanza Administration, will now be submitted to Parliament to guide the Government’s fiscal strategy,” the Cabinet dispatch, chaired by President William Ruto on Tuesday read.
Following the resumption of its sittings on Tuesday, the National Treasury is expected to table the Supplementary Estimates I for the 2025/26 financial year, the 2026 Budget Policy Statement (BPS), and the Medium-Term Debt Management Strategy, in line with the Constitution and the Public Finance Management Act.
According to the draft 2026 BPS, the total budget for the 2026/27 financial year is projected at Sh4.18 trillion, up from Sh3.92 trillion in the current year. The resource envelope includes Sh3.32 trillion in total revenue, leaving a fiscal deficit of Sh866 billion, or 4.6 per cent of GDP, to be financed through Sh586 billion in domestic borrowing and Sh280 billion from external sources.
The Treasury will seek Parliament’s approval for the Supplementary Estimates to adjust for revenue underperformance and additional expenditure pressures. Once tabled, the estimates will be reviewed by Departmental Committees of the National Assembly in consultation with Ministries, State Departments, and Agencies.
During the 2026 Legislative Retreat, National Treasury Principal Secretary Chris Kiptoo highlighted fiscal constraints shaping the 2026/27 budget framework.
“Implementation of the current budget has been affected by shortfalls in ordinary revenue amounting to Sh115.3 billion by December 2025,” Kiptoo said.
“We are tightening expenditure controls and prioritising ongoing projects through a zero-based budgeting approach.”
Kiptoo noted that Kenya’s economy remains resilient, with GDP growth projected at 5.2 per cent in 2026, supported by declining inflation of 4.5 per cent in December 2025, a stable exchange rate of Sh129 to the dollar, and upgraded sovereign credit ratings from Moody’s and S&P Global.
