Kenya’s budget deficit widened to 6.8 per cent of gross domestic product in the 2025/26 financial year, exceeding the original government target of 4.7 per cent and raising concerns over fiscal discipline, according to the World Bank’s November 2026 Kenya Economic Update.
The deficit was also higher than the 6.0 per cent recorded in the 2024/25 financial year, reflecting increased government expenditure and revenue collection that fell short of the original target.
The report showed that government revenue reached 17.3 per cent of GDP during FY2025/26, missing the initial target by 0.2 percentage points. Meanwhile, expenditure rose to 24.1 per cent of GDP, compared with the original budget allocation of 22.2 per cent.
The higher spending was attributed to increased operations and maintenance costs, development expenditure and interest payments. The widening gap between revenue and expenditure meant the government had to seek additional financing to meet its obligations.
The World Bank identified repeated supplementary budgets and weaknesses in budget execution as key issues affecting fiscal credibility. It said more realistic budgeting and tighter control of supplementary spending would be necessary to restore confidence in the government’s fiscal plans.
The report also warned that further fiscal slippage could increase government financing requirements, raise debt-service pressures and limit resources available for development priorities.
To address the challenge, the World Bank recommended stronger expenditure controls, more credible budget baselines and better prioritisation of public spending. It also called for improved revenue administration and a review of tax exemptions and incentives that may not be delivering sufficient economic benefits.
The pressure on public finances comes at a time when Kenya is seeking to preserve economic stability while financing infrastructure and essential public services. Continued budget overruns could make that balance harder to achieve.
The report said restoring fiscal discipline will be important in reducing borrowing needs and protecting resources for priority investments, particularly as the country faces external economic and climate-related risks.
