From Sh4.24 tr to Sh4.29 tr: Mbadi moving numbers raise eyebrows

When the National Treasury tabled the 2025/26 Budget Estimates in Parliament at the end of April, it indicated that the government’s total spending would be Sh4.24 trillion.

This has, however, changed, and while reading the Budget Statement on Thursday, Cabinet Secretary John Mbadi noted that the budget for the 2025/26 financial year would be Sh4.29 trillion.

This has necessitated an increase in the amount of money that the government will be borrowing — to plug the budget deficit — over the next financial year to Sh923 billion, up from the Sh876.1 billion contained in the initial estimates presented to Parliament in April.

The approximately Sh50 billion increase in the budget deficit corresponds with the increase in the total 2025/26 budget.

It is against this that experts have questioned the credibility of this budget, while also noting that in previous financial years, the Treasury has been shifting goalposts during the course of the year through the introduction of Supplementary Budgets.

This, they noted, erodes the purpose of the budget-making process, which starts early in the financial year, and in which the Treasury also involves Kenyans throughout.

Over the current fiscal year, the government has so far introduced two supplementary budgets and has stated it plans to seek parliamentary approval for a third.

If the third mini-budget is introduced, it will be just days before the end of the financial year on June 30.

“The CS was talking about the budget deficit of Sh923 billion... earlier, it stood at Sh876.1 billion,” said John Nyangi, a public finance expert.

This has had the effect of pushing up debt as a percentage of gross domestic product (GDP) to 4.7 per cent, from the earlier 4.5 per cent. The fiscal deficit will be financed by external borrowing of Sh287.7 billion and domestic borrowing of Sh635.5 billion.

“You can see the credibility of these numbers is not something that you can depend on. During the budget speech, there are good pronouncements and highlights, but when it comes to walking the talk, they are worlds apart,” he said.

Nyangi also noted that the Treasury has, over the years, set ambitious revenue collection targets for the Kenya Revenue Authority (KRA). When Mbadi read the budget on Thursday, he said that the government had been realistic in revenue projections for the next financial year, setting them at Sh2.75 trillion.

He noted that in addressing the “concerns on unrealistic revenue projections, we have reduced revenue projections to be in line with trends”, and added that the projections over the 2025/26 financial year and in the medium term would be “consistent with the growth of the economy”.

Nyangi, however, noted that through the years, KRA has consistently failed to meet targets, giving the example of the current financial year.

As of April, KRA had collected Sh1.8 trillion, meaning it would have to collect some Sh600 billion in May and June to meet the Sh2.4 trillion target for the 2024/25 financial year.

“Even now, with the target of Sh2.75 trillion, I can assure you that money can never come out of this economy,” said Nyangi.

He added that Kenya’s major challenge has been allocating resources to areas where they are most needed — areas that would yield greater returns in terms of job creation and economic expansion.

“Kenya’s problem is an expenditure problem and not revenue. If we are able to deal with expenditure and direct resources to areas with high impact, we would be able to generate more revenue and continually address expenditure,” said Nyangi.

Kacheliba MP Titus Lotee also noted that the country had, over the years, been too ambitious in terms of revenue targets without putting in place measures to expand the tax base.

“Every year, we have always been putting our revenue projections way above our abilities,” he said, adding that the country has consistently increased spending while doing little to curb high levels of wasteful expenditure.

“The problem is our expenditure, it is not the revenue. We have the capacity to raise money. What we need to do is ask the government to reduce expenditure. This discussion has always been there. We have seen non-essentials — such as tea and other areas — costing billions. Why do we need tea in offices when we are borrowing to bridge the gap between budget and revenues?”

Lotee also noted that supplementary budgets erode the budget-making process, which begins early in the financial year and culminates in the Budget Statement in June and the debate in Parliament on the Budget Estimates and the Finance Bill. In the budget-making process, the Treasury involves Kenyans, gathering their feedback on priority spending areas.

“Supplementary budgets always water down the meaning of budget reading. Why, three months down the line, do we adjust everything through a supplementary, and by the end of the year, the original budget has lost meaning?” he said.

James Nyoro, an agricultural economist, noted that the National Treasury has continued to approach budgeting in outdated ways, failing to reflect and learn from historical trends.

He pointed out that experience has shown KRA repeatedly misses targets, while expenditure continues to rise.

“As a result of that, two things happen: one is that the budget deficit keeps on going up, and this requires frequent supplementary budgets. You can be sure that there will be a supplementary budget before September this year to revise some figures,” he said.

Nyoro also observed that the Treasury has, over time, continued to deny funding to critical sectors with the potential to deliver better returns.

“The problem is when you come to sector allocations. If you cannot reduce overall expenditure, then what you do is put in money where you don’t expect better returns. Look at the money put into agriculture, which accounts for about a third of GDP… or manufacturing,” he said, explaining that these sectors are critical and need higher allocations.

The impact of failing to focus on high-impact sectors in allocations has been that “poverty is not reducing and employment is not improving”.

“We have set a template of making a budget without pausing and learning from our past mistakes,” said Nyoro.

“We have seen a trend in this country where we do not learn from our mistakes. In the last couple of years, we have seen the deficit increasing and now it is close to Sh1 trillion. We are in a pit as a country, and instead of starting to think of coming out of that pit, we are digging deeper.”