KRA misses revenue target by Ksh328B in six months
By John Otini, July 23, 2025The National Treasury has released the latest figures showing a significant shortfall in actual revenue collections for the financial year ending June 30, 2025, revealing a Ksh328 billion gap between actual receipts and revised targets.
This is critical because budgetary allocations are based on revenue estimates rather than actual receipts, meaning that Treasury will be forced to borrow more than it had estimated to cover the shortfall.
According to a gazette notice published on July 18, 2025, the government collected Ksh3.99 trillion in total receipts against a revised estimate of Ksh4.21 trillion, falling short of both the original and revised revenue projections.
The notice contains the National Treasury and Economic Planning statement of actual revenues and net exchequer issues as at June 30, 2025, and the printed estimates and actuals for the National Government exclude Appropriation in Aid (AIA).
Country’s fiscal plans
Tax revenue, which remains the backbone of the country’s fiscal plans, underperformed by nearly Ksh48 billion. The Treasury had hoped to raise Ksh2.31 trillion from taxes, but actual collections came in at Ksh2.26 trillion.
This reflects a constrained economic environment where businesses and households continue to grapple with a high cost of living, tight liquidity, and reduced consumer spending.
While non-tax revenue met expectations, delivering Ksh171.1 billion against a target of Ksh171 billion, the report shows a reliance on borrowing to bridge the fiscal gap.
Domestic borrowing brought in Ksh1.08 trillion, down from the revised estimate of Ksh1.2 trillion, while external loans and grants reached Ksh481 billion, slightly below the projected Ksh501 billion.
The figures point to tightened access to concessional borrowing and reduced appetite from foreign lenders amid Kenya’s sovereign credit concerns and rising debt-servicing costs.
The government also drew on Ksh4.4 billion from other domestic financing sources and began the year with an opening balance of Ksh1.16 trillion.
Combined, these sources helped boost available funds, but were still not enough to match the ambitious revenue targets set in the budget.
The Treasury’s inability to fully meet its revised estimates highlights the enduring challenge of revenue mobilisation despite ongoing tax reforms and increased enforcement efforts.
The shortfall is likely to have ripple effects across public spending priorities, including delayed disbursement to counties, slower infrastructure rollout, and constrained delivery of public services.
Economists and fiscal analysts have raised concerns about the sustainability of Kenya’s budget framework in the face of persistent underperformance in revenue collection.
It also comes amid widespread public discontent that resulted in widespread protests in the last two months.
Kenya’s fiscal position remains under pressure from high public debt, with a significant portion of government revenue now dedicated to interest payments.
The struggle to hit revenue targets, even after adjustments, is a sign of deeper structural inefficiencies in the tax system and weak economic activity.
To address these issues, the government may be forced to either revise its expenditure plans, ramp up borrowing even further, or explore new forms of domestic resource mobilisation.
However, with limited room to manoeuvre in international debt markets and growing public resistance to new taxes, the road ahead for fiscal consolidation remains bumpy.