The National Treasury has revised downwards  the total revenue projections for the financial year 2025/26 by Sh67 billion to stand at Sh3.317 trillion from Sh3.383 trillion in the Budget Policy Statement (BPS).

This two per cent change is in a bid to try and match with the current fiscal realities in the sense that the fiscal consolidation has been recording a reducing trend over time. Under the estimates provided by the national treasury, ordinary revenue is set to generate Sh2.757 trillion down from the Sh2.835 trillion in the BPS.

Down further, income tax is targeted to contribute Sh1.28 trillion from Sh1.3 trillion, representing a Sh39 billion change from the two projections, which is a 3 per cent difference while revenue expected from the Value Added Tax (VAT) reduced to Sh771.7 billion from Sh 775 billion representing a 0.4 per cent slash.

“So with that, at least you can see one of the concerns that touches on revenue has been addressed by basically revising down ordinary revenues systematically between around September and now that we have the budget estimate, we are at around Sh2.75 trillion,” Parliamentary Budget Office stated during the house briefing on Wednesday.

Conversely, the government will be targeting importers and manufacturers, as the revenue expected from the import duty and excise duty get revised upwards to Sh163 billion and Sh332.7 billion respectively from Sh152.5 billion and Sh332.7 billion respectively.

Other tax revenue, Appropriation-in-Aid and grants, are respectively expected to draw in Sh202.1, Sh559.9 and 46 billion with A-I-A being the only one that received an upward revision from Sh548.8 billion in the BPS.

“One thing that we point out is if you look at your appropriation-in-aid target, it’s close to Sh600 billion, and if you look at the trend, some efficiencies in aid collection have borne fruit in terms of significant increase in appropriation-in-aid. And this is usually the user fees and the fees that are collected by the different agencies,” the BPO highlighted.

Recurrent expenditure

On the expenditure side, the treasury has also made a downward review to Sh4.239 trillion from Sh4.297 trillion in the BPS to reflect a Sh57 billion – 1.35 per cent. Under this category, recurrent expenditure despite stakeholders asking for restructuring, has marginally been revised upwards in the budget estimate to Sh 1.789 trillion from Sh1.783 trillion in the BPS taking the biggest chunk.

Capital estimates -Development, which when combined with the recurrent expenditure brings the total national government allocation to Sh2.497 trillion, has received an allocation of Sh707.7 billion down from the proposed Sh740.4 billion in the BPS which is approximately 16.85 per cent of the total expenditure.

“One of the challenges we have had, it appears in terms of numbers, which translates to what members usually start out with development expenditure projections that is rather high, but the actual development expenditure tends to be way lower than what we start with,” the BPO explained.

According to the office, at the start of the financial year, development expenditure was close to Sh700 billion, but the actual ended up being about Sh500 billion.

In the consolidated Fund service, which comprises expenditure on interest payments and pensions among others, interest expenditure is set to take the biggest share of Sh1.097 trillion up from Sh995.7 billion coming the second largest expenditure after recurrent.

With this, total CFS stands at Sh1.337 trillion up from Sh1.242 trillion which is a 7.6 per cent. County Equitable Share has, however, been slashed downward by Sh13.19 billion to Sh405.07 billion from Sh 418.2 billion.

“That’s because parliament proposed Sh405 billion and treasury had also proposed Sh405 billion. However, the request that you might receive for county capital will share any addition to that. It means it squeezes out the deficit that we look at,” the BPO official note