Kenya’s 2025/26 budget could hit a historical high of KSh4.2 trillion, equivalent to 22.1 per cent of GDP, which includes Ksh3.09 trillion for recurrent spending, Ksh725.1 billion for development, Ksh436.7 billion in county transfers, and Ksh5 billion for the Contingency Fund.

The revelations were made on Tuesday, February 11, 2025, following a Cabinet meeting chaired by President William Ruto.

Under the Division of Revenue Bill 2025, the National Government proposes a shareable revenue of Ksh2.8 trillion, with Ksh405.1 billion allocated to county governments as an equitable share and Ksh10.6 billion for the Equalisation Fund.

The county allocation represents 25.8 per cent of the most recent audited revenue (Ksh1.57 trillion from the 2020/21 financial year). The County Allocation Revenue Bill 2025 will distribute the county share based on the Third Basis Formula, while the County Governments Additional Allocation Bill 2025 proposes an extra Ksh69.8 billion – Ksh12.89 billion from the National Government and Ksh56.91 billion from development partners. With these additional funds, total county transfers for 2025/26 will amount to Ksh474.87 billion.

“Under the Bottom-Up Economic Transformation Agenda, GDP growth rebounded to 5.6% in 2023, up from 4.9% in 2022, driven by a strong recovery in agriculture after two years of drought. Growth is projected to remain stable at 5.3% in 2025 and 2026, supported by increased agricultural productivity, a resilient services sector, and strategic government interventions,” a despatch from cabinet read in part.

“To maintain economic momentum, the government has outlined six key priorities: reducing the cost of living, eradicating hunger, creating jobs, expanding the tax base, improving foreign exchange balances, and fostering inclusive growth. These will be achieved through strategic investments in key economic sectors, strengthening production and market access, and attracting local and foreign investments.”

The government says the Medium-Term Revenue Strategy will guide tax reforms, ensuring efficiency, fairness, and progressivity while balancing revenue generation with social protection. Key measures include expanding the tax base, leveraging technology for tax efficiency, sealing revenue loopholes, and maximising non-tax revenues from ministries, departments, and agencies.

The cabinet has also approved the proposed 2024/25 Supplementary Estimates No. II, authorising an additional Ksh344.8 billion in expenditures, with Ksh199.0 billion allocated for recurrent spending and Ksh145.8 billion for development. These funds will address government and externally financed projects, personnel emoluments, budget realignments, and revenue adjustments.

The approval comes amid economic disruptions, including civil protests in June, July, and August 2024, which led to the withdrawal of the Finance Bill 2024. The Bill had initially proposed raising KSh344.3 billion in additional revenues but faced strong public opposition.

The Cabinet has also approved increase on duty-free threshold of goods brought into the country, which has now been increased from Ksh50,000 to Ksh250,000.