Auditor General flags risks in Kenya’s Sh4.24 trillion budget, warns of rising debt
The Auditor General pointed out that this shortfall stems from tax evasion, poor enforcement, and inaccurate forecasting.
Auditor General Nancy Gathungu has raised serious concerns about Kenya’s 2025-26 budget, warning that poor financial management, overambitious revenue targets, and weak execution of development projects could push the country deeper into debt and weaken essential public services.
In a detailed 24-page presentation to the Budget and Appropriations Committee, Gathungu highlighted that the government’s revenue projections are overly optimistic and not backed by realistic enforcement strategies, casting doubt on the government’s ability to deliver on its economic transformation agenda.
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The proposed budget, totalling Sh4.24 trillion, expects ordinary revenue of Sh2.76 trillion, which falls short of the World Bank’s recommended tax-to-GDP ratio of 15 per cent.
The Auditor General pointed out that this shortfall stems from tax evasion, poor enforcement, and inaccurate forecasting.
Historical data shows a persistent failure to meet revenue targets, with the 2023-24 fiscal year recording a revenue shortfall of Sh170 billion, or nearly 7 per cent.
Tax arrears have also surged dramatically to Sh2.33 trillion, a 133 per cent increase from the previous year. “The KRA’s targets are disconnected from reality,” Gathungu stated.
She warned that such inflated projections force the government to borrow more, deepening the national debt, which currently stands at Sh11.1 trillion.
She urged the National Treasury to adopt “cautious, evidence-based forecasts” and improve tax systems to curb evasion and boost revenue.
Gathungu also criticised the poor use of development funds allocated in the budget. Although Sh643.9 billion (about 26 per cent of the budget) is set aside for development, actual spending falls short of the legal requirement to dedicate 30 per cent of the budget to development projects.
The 2023-24 fiscal year saw only 29 per cent of allocated funds used, leaving many projects unfinished and some with pending bills.
Donor-funded projects also suffered from poor execution, with Sh304 billion of Sh515 billion unspent by mid-2024, leading to penalties of Sh6.57 billion on undrawn loans.
Among the most underperforming projects is the Mombasa Gate Bridge, which has used only Sh938 million but still has 98 per cent of its funds undrawn, demonstrating widespread inefficiency in development spending.
Gathungu’s report sends a strong message that without reforms, Kenya risks undermining critical public services and facing increased borrowing costs.
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