MPs warn of Sh200 billion revenue shortfall as 2025-26 budget hits Sh4.4 trillion
The widening gap between revenue and spending means the fiscal deficit is expected to rise to 5.7 per cent of GDP in 2025-26.
The National Assembly's budget team has projected a revenue shortfall of Sh200 billion for the financial year 2025-2026, raising concerns over the country's fiscal position even as government spending is expected to rise.
A report released on Thursday by the Parliamentary Budget Office (PBO) estimates that the country will collect Sh3.3 trillion in revenue, lower than the National Treasury's projection of Sh3.5 trillion.
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The shortfall is attributed to low economic activity, which has already affected revenue collection in the current financial year.
"This is partly explained by the fact that the actual revenue collection for the first half of 2024-25 is below target by over Sh70 billion, meaning the total revenue projected for 2024-25 is likely to be off target,'' the PBO report states.
The report further warns that since the 2024-25 revenue target forms the basis for the National Treasury's projections for 2025-26, the estimates are unlikely to be met.
Expenditure expected to increase
Despite the projected revenue drop, government expenditure is set to increase, with total spending and net lending expected to rise from Sh3.9 trillion to Sh4.4 trillion in the next financial year, beginning July 1.
Total spending is Sh50 billion, less than what was predicted in the Budget Review and Outlook Paper (BROP). This is because estimates for recurring costs are higher and estimates for development costs are lower.
The widening gap between revenue and spending means the fiscal deficit is expected to rise to 5.7 per cent of GDP in 2025-26, up from 4.3 percent this year.
"This is higher than the BROP projection due to the lower revenue projections by the PBO," the report adds.
The budget office has cautioned that declining revenues and increasing expenditures could push the country further into debt, even as the government continues to emphasise austerity measures.
Currently, Kenya's debt stands at 71 per cent of GDP, exceeding the anticipated 55 per cent.
However, the National Treasury has defended its fiscal strategy, expressing confidence in its plan to boost revenue collection and reduce the debt burden.
National Treasury Cabinet Secretary John Mbadi on Thursday assured that the government is taking deliberate steps to enhance production while managing debt repayment.
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