Treasury projects Sh4.49 trillion budget for 2025/26 financial year

The National Treasury has projected a total budget of Sh4.485.7 billion for the 2025/26 financial year, marking a significant increase from the Sh3.94 trillion for the 2024/25 Financial Year.

The budget allocation includes funding for the three Arms of Government as well as sharable revenues to County Governments, according to the draft Budget Policy Statement for the Medium-Term Expenditure Framework (MTEF) FY 2025/26-2027/28 released on Wednesday.

According to the draft report, the National Government will receive Sh2.7 trillion, up from Sh2.3 trillion in the 2024/25 financial year.

The largest share of the National Government’s allocation goes to the Executive, which is set to receive Sh2.68 trillion, accounting for 59.8 per cent of the total allocation. Parliament will be allocated Sh42.4 billion (0.9 per cent), while the Judiciary will receive Sh25.6 billion (0.6 per cent).

County governments, however, will see a slight reduction in their allocation, receiving Sh405 billion, down from Sh410 billion in the previous financial year.

In the FY 2025/26 budget, the government plans to adopt the zero-based budgeting approach, which will ensure that all expenditures are justified based on current needs rather than previous budgets.

Revenue projections for the 2025/26 financial year are expected to reach Sh3.516 trillion, representing 18.2 per cent of the Gross Domestic Product (GDP), up from Sh3.060 trillion (16.9 per cent of GDP) in FY 2024/25.

Of this, ordinary revenue is expected to amount to Sh3.018 trillion, which is an increase from Sh2.631 trillion in the previous year. The Treasury said this revenue growth will be driven by ongoing reforms in tax policy and administration aimed at expanding the tax base and improving compliance.

Expenditure for the 2025/26 financial year is projected to be Sh4,329.3 billion (22.5 per cent of GDP), up from the previous year’s projection of Sh3,880.8 billion (21.5 per cent of GDP). The Treasury said this would include Sh3,076.9 billion for recurrent expenditure (16.0 per cent of GDP), Sh804.7 billion for development expenditure (4.2 per cent of GDP), Sh442.7 billion for transfers to counties, and Sh5.0 billion for the Contingency Fund.

Fiscal deficit

The fiscal deficit for the year is also projected to be Sh759.4 billion (3.9 per cent of GDP), slightly reduced from Sh768.6 billion (4.3 per cent of GDP) in the previous year. This deficit will be financed through net external financing of Sh213.7 billion (1.1 per cent of GDP) and net domestic financing of Sh545.8 billion (2.8 per cent of GDP).

The Treasury reiterated that the FY 2025/26 budget and medium-term financial plan will focus on the implementation of the Bottom-Up Economic Transformation Agenda (BETA), which aims to promote inclusive growth and economic turnaround.

BETA will prioritise sectors such as agriculture, healthcare, housing, micro, small and medium enterprises (MSMEs), and the digital superhighway and creative industries. Key enablers of growth including infrastructure, manufacturing, and social protection will also be prioritised.

The Treasury has stated that resources for these priority programmes will be allocated through a value chain approach, ensuring that there is no disruption in the cycle of resource allocation for each sector. This approach is expected to streamline the allocation of resources, eliminate duplication of roles, and enhance efficiency.

“The focus will be on achieving quality outputs and outcomes, with the optimum utilisation of resources,” reads the report, adding that ministries, departments, and agencies (MDAs) are expected to ensure efficiency by adhering to zero-based budgeting principles and reviewing externally funded projects.

The budget will also prioritise the completion of ongoing projects, including those focused on poverty reduction, employment creation, and environmental conservation.

MDAs will be required to align their expenditure plans with government priorities, particularly those in line with Vision 2030 and the Medium-Term Plan (MTP) IV.

The public has been invited to submit their comments on the draft 2025 Budget Policy Statement to aid in the finalisation of the document.

Treasury Cabinet Secretary John Mabdi said feedback should be sent to the National Treasury by the close of business on Tuesday, January 21, 2025, via email at [email protected].