Kenya’s Budget Deficit Soars to KSh 797.7 Billion as Revenue Gaps Persist and Debt Pressures Mount
On June 20, 2025, the Kenyan Treasury revealed that the country’s fiscal deficit for the 2024/25 financial year had ballooned to KSh 797.7 billion (~US $6.2 billion) by the end of April. This staggering shortfall—financed through KSh 441.8 billion in net foreign borrowing and KSh 355.9 billion in domestic borrowing—underscores mounting pressures on the national budget amid persistent revenue underperformance.
This comes as Finance Minister John Mbadi gears up to present a new budget designed to bolster revenues for debt servicing while steering clear of new taxes that could reignite the widespread protests experienced in 2024.
Those protests, triggered by the Finance Bill’s aggressive tax hikes (over KSh 346 billion), resulted in fatalities and forced the government to retract several controversial clauses.
With public sentiment still fragile, Mbadi has pledged no new direct taxes but intends to widen the tax base, sharpen compliance, and trim expenditure. Still, tax experts caution that revenue gaps may persist, and Kenya’s shaky track record on budget execution could require mid‐year revisions, threatening fiscal credibility .
The government’s strategy also leans heavily on external financing. Earlier this year, Kenya borrowed US $600 million from commercial banks to fund road infrastructure through securitized fuel levies .
It is also pursuing a larger US $1.5 billion syndicated loan or bond. Yet, Kenya continues to grappling with a high debt-to-GDP ratio, hovering at two-thirds—well above the 55% threshold deemed safe .
Looking ahead, the Finance Ministry projects the 2025/26 budget deficit to narrow to 4.3% of GDP (from 4.9%), with total expenditure increasing to KSh 4.34 trillion (~US $34 billion). It plans to finance this via KSh 146.8 billion in net external funding and KSh 684.2 billion in domestic borrowing . Achieving this will require prudent execution, stronger tax collection, and effective cost controls—all while managing public expectations and avoiding renewed unrest.
Read:
- EACC Recovers 12 Stolen Land Plots Worth Sh320 Million in Western Kenya
- Court Of Appeal Upholds Ruling Against MozzartBet in Sh256M Money Laundering Case
In essence, Kenya’s fiscal outlook presents a precarious balancing act: addressing chronic revenue shortfalls and rising debt, safeguarding economic recovery, and preserving the fragile social compact. With structural reforms and adherence to prudent fiscal discipline, Nairobi hopes to stabilize public finances and bolster confidence—both domestically and from international partners such as the IMF.
