Treasury Cabinet Secretary John Mbadi (left) and President William Ruto at State House, Nairobi, on August 12, 2024.
The National Treasury yesterday tabled the 2026 Budget Policy Statement (BPS), offering a sneak peek into President William Ruto's strategy for winning over Kenyans by dangling goodies for key voter constituents while easing their tax pressure as he prepares to seek another five-year mandate.
In the BPS—the fourth prepared under the Kenya Kwanza administration—the Ruto-led government plans to spend a total of Sh4.7 trillion in the financial year starting in July, in a budget that largely targets jobless youths, small businesses and Kenyans in the rural areas.
Regions such as Western Kenya and North Eastern will also be major beneficiaries in Ruto’s last full-year budget before he seeks another mandate from Kenyans, as the Kenya Kwanza transitions from the bottom-up strategy that propelled Ruto to power in 2022 to “Whole-of Government” approach to service delivery.
The Sh4.7 trillion budget is Sh200 billion more than the total expenditure projected for the current financial year ending June. The government projects to spend Sh4.5 trillion.
The BPS is a key public document that anchors the budget-making process of both the national and county government.
These funds will be used to roll out "Singapore-enabling" initiatives—such as the Sh5 trillion Infrastructure Fund and the NYOTA program, which provides youth with access to affordable capital—while completing flagship projects under the Bottom-Up Economic Transformation Agenda (BETA).
"Building on the strong foundations established over the past three years, the statement consolidates progress achieved in implementing the Bottom-Up Economic Transformation Agenda (BETA)," said the Cabinet Secretary for National Treasury John Mbadi.
Having won the 2022 elections by narrowly beating his challenger, former Prime Minister Raila Odinga, President Ruto will be seeking to seeking a fresh mandate from Kenyans distressed by lack of jobs and high cost of living. Raila died in October, last year.
The government also appears to be climbing down from its aggressive tax-raising measures, cutting its ordinary revenue target by Sh96.4 billion from the Sh2.998 trillion for the upcoming financial year originally projected in the 2025 Budget Review and Outlook Paper (BROP).
In the 2025 BROP, another document that precedes BPS and looks back at the government’s revenue and spending achievements and also looks forward to three years, the Treasury has revised downwards its tax collection target to Sh2.901 trillion.
National Treasury Cabinet Secretary John Mbadi displays his briefcase before the reading of the National Budget on June 12, 2025.
Tax laws
The changes also reflect recent statements from government, with Mr Mbadi promising law changes that would give salaried workers earning below Sh50,000 monthly income tax cuts of between Sh731 and Sh2,127.
Mbadi said his ministry has prepared a Tax laws (Amendment) Bill that will raise the threshold of untaxed income from Sh24,000 to Sh30,000 and have income falling between Sh30,000 and Sh50,000 taxed at 25 percent.
Income above Sh32,333 attract a tax rate of between 30 and 35 percent currently.
The easing of taxes comes as the State seeks to placate the electorate in the last full fiscal year before the General Election of August 2027.
Factored into the next budget cycle, such changes are likely to negatively impact tax collection owing to the huge number of Kenyans taking home a monthly salary of less than Sh50,000, explaining the decision by Treasury to review downwards its tax collection target.
Rather than cut its expenditure in line with the lower revenue targets, the Treasury has increased its borrowing limit for the financial year starting in July by Sh104.1 billion to Sh1.170 trillion, signalling mounting spending pressures amid political calls to ease taxation ahead of the 2027 General Election.
The Cabinet Secretary for the National Treasury and Economic Planning John Mbadi (left), and National Treasury Principal Secretary Dr Chris Kiptoo appear before a joint sitting of the Departmental Committee on Finance and National Planning and the Select Committee on Public Debt and Privatization to deliberate on the proposed partial divestiture of the government's shareholding in Safaricom PLC, at Glee Hotel, Nairobi, on January 13, 2026.
Kenya’s borrowing gap has widened from Sh1.066 trillion, with the loans being funnelled into various development projects including the extension of the Standard Gauge Railway (SGR) to Malaba via the lakeside city of Kisumu.
Dr Ruto, who is yet to complete a mega project in the magnitude of the SGR or the Nairobi Expressway launched by his predecessor Uhuru Kenyatta, has also indicated that government will start the upgrading of the Nairobi-Nakuru-Mau Summit Highway into a dual carriageway toll road.
Both projects are expected to open up the Western region of the country, vote-hunting region for President Ruto who experts say will struggle to entice the populous Mount Kenya region that voted for him to the man last elections.
The BPS points to goodies being sent to North Eastern region, with the government promising to distribute 3.5 million assorted fruit seedlings nationwide “including date palms for the ASAL regions.”
The government will also establish a camel-milk processing plant, a boon for the north eastern region whose voters President has been courting.
The fertilizer subsidy will also be extended with the government planning to avail 2.3 million tonnes of the agricultural input and 40,000 tonnes of agricultural lime to 4.4 million smallholder farmers nationwide.
Besides NYOTA programme in which individuals can access up to Sh50,000 in loans from the World Bank, government will supplement the existing hustler fund programme. The government plans to disburse Sh100 billion from the Hustler Funds to reach 20 million Kenyans.
The government will also expand the credit guarantee scheme to facilitate Sh50 billion worth of loans to over 200,000 enterprises.
It has also committed to hire 120,000 community health promoters, who will be receiving a monthly stipend.
President William Ruto and the Cabinet Secretary for National Treasury John Mbadi during a thanksgiving service in Suba South, Homa Bay County.
Campaign promises
The need for increased borrowing is due to spending pressure, with President Ruto’s government keen on achieving campaign promises as the country nears the general elections.
Recurrent expenditure, which includes non-capital generating expenses such as payment of salary and operation and maintenance, has been projected at Sh3.456 trillion, while development expenditure is projected at Sh749.5 billion.
The 47 counties will receive a total of Sh495.5 billion as shareable revenue from the National Treasury, while the Contingency Fund will get Sh2.0 billion.
The government expects to mobilise revenue amounting to Sh3.533 trillion in the review period, with a big chunk of it, Sh2.9 trillion, being ordinary revenue, or largely taxes. This leaves the government’s spending budget with a deficit of Sh1.115 trillion.
With one year to the election, President Ruto will be keen to complete some of his flagship projects under the Bottom-Up Transformation Agenda (BETA), which targets ordinary Kenyans, popularly known as the hustlers.
The Cabinet Secretary for National Treasury, John Mbadi, has also indicated that Kenya is uncertain about returning to the Eurobond market despite signs of improved conditions, including falling interest rates that have lured African peers such as Benin back into the international bond market.
“As far as the plan and timing for Kenya to return to the market is concerned, that will be determined by the prevailing market conditions and the status of other expected financing options,” said Mbadi.
“Whereas the redemption profile currently looks smooth, there is still room for additional liability management operations, particularly to address other expensive commercial debt instruments in the public debt portfolio.”
Kenya is keen to reduce its fiscal deficit to 5.3 percent of GDP by the financial year ending June 2027. It has thus been undertaking fiscal consolidation, which includes austerity measures such as trimming non-critical expenses—including travel and hospitality—and implementing tax measures focused on improving compliance and expanding the tax base.
In the first half of the current financial year, the country borrowed a total of Sh518.1 billion against a target of Sh442.4 billion, with a big chunk of the money, Sh509.2 billion, coming from domestic investors. Foreign loans amounted to Sh7.8 billion.
Through the fiscal consolidation plan, the Treasury expects the overall fiscal deficit to gradually decline from 5.3 percent of GDP in the financial year 2026-27 to 3.6 percent of GDP in the following period to 3.3 percent of GDP in the period ending June 2029.
“This will boost the country’s debt position and ensure the country’s development agenda is sustainably funded,” said the Treasury.
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