Government cuts funding to merged, dissolved state corporations
Kenya is phasing out funding for merged and dissolved state corporations by mid-2026, limiting budgets mainly to salaries as it restructures agencies to cut recurrent costs and streamline operations.
The government has begun cutting funding to state corporations that were either merged or dissolved earlier this year, aiming to completely end financial support for these entities by mid-2026 as part of a wider overhaul.
Treasury Cabinet Secretary John Mbadi explained that the allocations for these agencies have been limited mainly to staff salaries, allowing for smooth transitions or closures.
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“In this financial year, we tried to reduce the budget for those entities to the bare minimum for salaries just to transition, and many of them have been dissolved. The Tourism Promotion Fund is no more; it has been merged with the Tourism Fund and many others,” Mbadi said.
Earlier in January, the government carried out a major restructuring exercise, merging 42 state corporations and agencies into 20 new bodies, dissolving nine, restructuring or divesting from 12, and declassifying 17 public funds and professional organisations.
Treasury’s public investment and portfolio management office said the restructuring is progressing steadily, with further budget reductions expected in the next fiscal year.
The review focused on organisations with overlapping roles, duplicated staffing, or functions that have become outdated, to save billions of shillings in administration and personnel costs.
According to the Parliamentary Budget Office (PBO), the recurrent budget for state corporations in the current financial year is Sh118 billion, with most of this spending linked to agencies now targeted for mergers.
The Tourism Promotion Fund and Tourism Fund alone have a combined recurrent budget of Sh8.2 billion.
The Uwezo Fund, Women Enterprise Fund, and Youth Enterprise Development Fund have also been consolidated into a single entity, with a joint recurrent budget of Sh787 million. Recurrent budgets cover operational costs such as salaries and administration.
“We are already acting, and my directorate of public investment and portfolio management is already progressing very well with the process of restructuring of our state-owned enterprises,” Mbadi said.
Nine agencies are being dissolved entirely, including the LAPSSET Corridor Development Authority and the Kenya Film Classification Board, with a total recurrent budget of Sh1.62 billion.
Treasury has assured that staff in the affected entities will not be forced out, except if they choose to exit voluntarily.
The PBO had earlier warned that shutting down just eight regional development agencies could threaten 1,629 jobs and trigger legal or political challenges.
The restructuring affects multiple sectors, including education, tourism, agriculture, infrastructure, water, and trade, reflecting the government’s commitment to streamline state operations and reducing public spending on overlapping or obsolete agencies.
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