The National Assembly has set a KSh2.878 trillion ceiling for national government spending in the 2026/27 fiscal year, defining maximum allocations for ministries and agencies ahead of next year’s budget, as legislators also push for more reforms of government enterprises.
- •The recommendation frames the 2026/27 budget before it is finalized by the National Treasury and will be voted on in the coming session.
- •Under the proposal, the Executive would receive KSh2.797 trillion, Parliament KSh50.7 billion, the Judiciary KSh30.4 billion, and the Office of the Auditor-General KSh9 billion.
- •MPs have also called for the rationalization, merger or dissolution of duplicative or financially weak state corporations by October 2026 to reduce fiscal pressure.
County governments will receive KSh420 billion in equitable share allocations, KSh9.6 billion for the Equalisation Fund, and an additional KSh75.69 billion in supplementary county allocations.
The ceiling comes amid broader fiscal pressures as total government spending is projected at KSh4.7375 trillion, up KSh435.7 billion from the current year, driven by additional recurrent spending, development projects, and higher county transfers.
Even with projected revenue of KSh3.588 trillion, equivalent to 17.7% of GDP, the fiscal deficit is expected to widen to KSh1.1495 trillion, or 5.5% of GDP. Most of the shortfall will be financed through KSh924 billion in domestic borrowing, with external borrowing accounting for KSh225.5 billion. Heavy reliance on domestic debt risks crowding out private sector lending and raising financing costs.
“This is worrying but we must know that we are servicing debts that were incurred in the previous regimes. We have in place strategies to ensure that debts do not continue rising and still run a budget that meets the expectations of Kenyans,” said the Chairman of the committee, Samuel Atandi.
According to submissions by the Auditor General, the debt burden remains a central concern as servicing it is expected to consume roughly 68% of government revenue, well above the East African Community benchmark of 55%, leaving limited funds for public services and development. The cost of domestic borrowing is now more than three times higher than external debt.
Pending Bills, and Moribund State Enterprises
The challenges are compounded by the growing number of stalled projects. The data from the Auditor General shows that 29 ministries, departments, and agencies had stalled projects valued at KSh31.4 billion in 2024/25, with KSh7.6 billion already spent on unusable projects.
“This budget statement sets the ceiling for the various ministries and we are hoping that they will prioritize pending bills as the first charge because we have pending bills that have stayed for long without clearance and this limits money circulation,” said the committee vice-chair, Robert Pukose.
County governments also face persistent wage and development constraints: average wage bills stand at 41.4% of revenue, above the 35% legal ceiling, while actual development spending reached only 26.3% of budgeted allocations. Pending county bills total KSh183 billion, or roughly 30% of county budgets.
Beyond fiscal allocations, members of parliament urged faster reform of state-owned enterprises.
“If we continue financing those SOEs then we continue growing our fiscal deficit but we must also ensure the expenditure rationalization is actualized when the estimates come in,” said Majority Leader of the National Assembly, Kimani Ichung'wa.
Meanwhile, the government projects that GDP will expand by 5.3% in 2026, supported by agriculture recovery, construction activity, infrastructure investment, tourism, and services. However, industrial growth remains weak as manufacturing’s share of GDP falling from 8% in 2022 to 6.5% in 2025.
