Parliamentary Budget Office warns Sh2.2 trillion projects at risk over funding delays

Kenya faces the risk of stalling development projects worth Sh2.2 trillion due to delays by the government in releasing its share of funding, the Parliamentary Budget Office (PBO) has said.

A gap of Sh130 billion in counterpart contributions with external partners could slow or block 234 ongoing and new initiatives across the country.

The PBO cautioned that failure by the government to provide timely funding could push donors and creditors to divert resources to off-budget programmes, which are less transparent and harder to monitor.

In its report on budget execution for the 2025/26 fiscal year, the office highlighted that Sh2.17 trillion from bilateral and multilateral loans and grants is already committed to these projects, but their success hinges on the government delivering its portion.

“With regards to Official Development Assistance (ODA) resources channelled and managed through the annual budgeting process, recent estimates put Kenya’s overall ODA portfolio at Sh2.2 trillion, comprising Sh1.9 trillion as loans and Sh251 billion as grants, if shortfalls in counterpart funding (GOK share) are fully provided,” the PBO said.

Under the counterpart funding framework, the government must lead by providing upfront cash or resources to kickstart projects, including activities like purchasing land for infrastructure.

The PBO notes that in the current financial year, over a third of the development budget relies on external support, underscoring the country’s dependency on donor funds.

For 2025/26, the government’s development budget totals Sh744.8 billion, with Sh258.4 billion (34.7 per cent) expected from external sources, down from Sh278 billion in the previous year.

“However, low absorption, weak coordination, and contractual challenges continue to limit effectiveness, causing delays, reduced drawdowns, and diluted impact, while increasing the risk of partners shifting resources,” the report says.

The office warned that bureaucratic delays and fiscal hurdles have left billions of shillings from donors and creditors idle, threatening their diversion to off-budget activities.

These include programmes run directly by funders or implementing agencies, such as the Global Fund’s efforts in treating tuberculosis, malaria, HIV and AIDS, and the Global Alliance Vaccine Initiative’s support for health services.

Without prompt government action, the PBO says, these projects risk prolonged delays, reduced impact, and loss of visibility, undermining the country’s broader development agenda.

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