Treasury has adjusted its financial targets mid-year, ahead of the 2026/27 fiscal year with every revision pointing to the same uncomfortable direction.
In the 2025/26 Budget estimates, Kenya’s National Treasury has cut the tax revenue targets from KSh2.63 trillion to KSh2.6 trillion, citing a lag in the taxman’s.
While the International Monetary Fund and the World Bank have been pushing the Kenya Kwanza administration to cut the fiscal deficit, this has widened from KSh901 billion to between KSh1.12 and KSh1.14 trillion.
Treasury has also increased size of the 2025/26 National Budget from KSh4.3 trillion to KSh4.695 trillion with external financing cut to KSh254.8 billion, a move triggered by delays to reach a new deal with the IMF, multilateral loans delays and prevailing high global rates.
Treasury increases Domestic Borrowing Requirements
Treasury’s move to increase domestic borrowing target for the 2025/26 fiscal year has also caught the attention of many financial experts, with Central Bank of Kenya Governor Dr Patrick Thugge at pains to calm the financial system.
In its first supplementary budget for 2025/26, the Government has raised the domestic borrowing target to KSh 996 billion up from the initially planned KSh 631 billion. This has sparked fears of renewed pressure on interest rates. But CBK Governor said a large portion of this projected amount has already been spent.
In its forecast in April 2026, the IMF has cut Kenya’s 2026 Growth Rate to 4.5% shocks from the ongoing Middle East War. Reasons for the downgrade includes spill over effects of the Gulf Crisis on energy costs, fertilizer prices, trade disruptions, weaker foreign demand for Kenya’s key exports and a widening trade deficit.
The IMF expects Kenya’s growth to record a modest rebound at 4.7% in 2027 as global tensions ease and ingoing fiscal reforms take effect.
CBK however remains optimistic and puts Kenya’s projected growth in 2026 at 5.5%, Treasury at 5.3% and the World Bank at 4.4%
Kenya’s projected growth lags behind regional peers Uganda 7.5%, Tanzania 5.9% and Rwanda 7.2%.
While CBK has put its growth projections above those of the IMF, at 5.5% this year, this outlook is subject to risks, including adverse weather conditions, elevated trade policy uncertainties and geopolitical tensions.
In its latest weekly report, the CBK said International oil prices remained elevated during the week ending April 16, despite the US-Israel-Iran ceasefire. Murban crude oil declined marginally, trading at US$89.61 per barrel on April 16, compared to US$90.33 per barrel on April 9, reflecting continued restrictions on shipping through the Strait of Hormuz.
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