Cabinet proposes Sh4.2tn budget for next financial year with Sh725bn on development » Capital News
NAIROBI, Kenya, Feb 12 — The National Treasury will present a Sh4.2bn spending plan for the 2025/26 featuring a Sh725.1 billion expenditure on development projects and Sh436.7 billion allocation for counties.
The Cabinet adopted the projections on Tuesday when President William Ruto chaired a session that endorsed the 2025 Budget Policy Statement (BPS).
The budget, which will be forwarded to Parliament, represents 22.1 per cent of the country’s GDP.
The government will allocate Sh3.09 trillion for recurrent spending with an additional Sh5 billion proposed for the Contingency Fund.
In line with the Division of Revenue Bill 2025, the National Government has proposed a shareable revenue of Sh2.8 trillion.
Of this, county governments will receive Sh405.1 billion as an equitable share, with an extra Sh10.6 billion allocated to the Equalisation Fund.
The county allocation represents 25.8 per cent of the most recent audited revenue, aligning with constitutional requirements.
“The government remains committed to fiscal stability while ensuring adequate resources for both national and county development,” the Cabinet noted.
To supplement the county budget, an additional Sh69.8 billion will be provided—Sh12.89 billion from the National Government and Sh56.91 billion from development partners—bringing total county transfers to Sh474.87 billion.
Economic Growth and Fiscal Priorities
The 2025 BPS outlines key government priorities under the Bottom-Up Economic Transformation Agenda.
Notably, GDP growth rebounded to 5.6 per cent in 2023, up from 4.9 per cent in 2022, primarily due to a recovery in agriculture after two years of drought.
Growth is projected to stabilize at 5.3 per cent in 2025 and 2026.
To sustain economic momentum, the government has identified six priority areas: reducing the cost of living, eradicating hunger, creating jobs, expanding the tax base, improving foreign exchange balances, and fostering inclusive growth.
“These objectives will be achieved through strategic investments in key economic sectors, strengthening market access, and attracting both local and foreign investment,” the statement read.
The government’s fiscal strategy emphasizes fiscal consolidation to reduce debt vulnerability while maintaining essential public services.
Measures include expenditure rationalization, revenue mobilization, and enhanced tax compliance.
The Medium-Term Revenue Strategy will guide tax reforms aimed at efficiency, fairness, and progressivity.
Key fiscal measures include: expanding the tax base, leveraging technology for tax efficiency, sealing revenue loopholes and maximizing non-tax revenues from government entities.
Additionally, the government will seek to strengthen public finance management through zero-based budgeting, accrual-based accounting, and the adoption of a Treasury Single Account for better cash flow management.
The government also plans to operationalize the IFMIS asset inventory management system and expand Public-Private Partnerships (PPPs) to boost private sector participation in public service delivery.
Supplementary Budget and Economic Challenges
Cabinet also approved the 2024/25 Supplementary Estimates No. II, authorizing an additional Sh344.8 billion in expenditure.
This includes Sh199.0 billion for recurrent spending and Sh145.8 billion for development projects. These funds will address government priorities such as externally financed projects, personnel costs, and budget realignments.
The decision comes in the wake of economic disruptions, including nationwide protests in mid-2024 that led to the withdrawal of the Finance Bill 2024.
The bill initially aimed to raise Sh344.3 billion in additional revenue but was met with strong public opposition.
Additional Cabinet Approvals
Beyond the budget, Cabinet approved key measures to enhance passenger experience at Jomo Kenyatta International Airport (JKIA).
The measures will see government exempt all African citizens from Electronic Travel Authorization (ETA) requirements, increase the duty-free threshold for Kenyan travelers from Sh50,000 to Sh250,000 and enhanced queue management.
The government willl also enhance security screening using risk-based profiling in addition to doubling immigration booths and staff to reduce clearance times.
Additionally, JKIA infrastructure will be modernized with improved baggage handling, enhanced drainage systems, covered walkways, and clearer signage.
Cabinet also endorsed various international agreements, including tax treaties with Singapore to eliminate double taxation and hosting agreements with international organizations such as the International Institute for Democracy and Electoral Assistance, Save the Children, and Oxfam International.
The government reaffirmed its commitment to strengthening Kenya’s global trade and investment ties, positioning the country as a key regional economic hub.