The National Treasury has raised fresh concerns over the country growing dependence on borrowing, warning that a widening budget deficit could undermine fiscal stability.
Appearing before the National Assembly Public Debt and Privatisation Committee, Treasury Principal Secretary Chris Kiptoo said the deficit is projected to hit KSh1.12 trillion, a sharp increase from the KSh901 billion approved in the June 2025 budget.
Kiptoo told lawmakers that continued borrowing to bridge the gap between revenue and expenditure is becoming unsustainable. He warned that without urgent fiscal consolidation, the country financial outlook could deteriorate.
“Borrowing is not sustainable. Without meaningful fiscal consolidation, it will be very difficult going forward,” he said.
According to Treasury estimates, the government plans to finance KSh924.5 billion of the deficit through domestic borrowing, with an additional KSh229.8 billion sourced externally.
Rising borrowing and revenue concerns
Kiptoo emphasized the need to broaden the tax base, noting that the current system disproportionately burdens compliant taxpayers while many remain outside the tax net.
“We want taxation to be more equitable,” he said, adding that the government will strengthen the Kenya Revenue Authority to boost collections.
However, efforts to increase revenue come amid public resistance to new taxes, complicating fiscal reforms.
Committee chair Abdi Shurie criticized what lawmakers described as fiscal indiscipline, particularly the tendency to overestimate revenues, leading to persistent shortfalls.
“When revenues are not increasing, why continue expanding expenditure?” he asked.
Kiptoo also cited rising recurrent expenditure, including a higher wage bill driven by salary adjustments and benefits for constitutional offices. Allocations for salaries and allowances are projected at KSh5 billion, up from KSh4.6 billion.
Meanwhile, the pensions budget remains unchanged at KSh234 billion.
Economists caution that heavy domestic borrowing could crowd out private sector credit. As the government competes for funds, businesses may struggle to access affordable loans, potentially slowing economic activity.
The disclosures increase pressure on the government to rein in spending and reduce reliance on debt. Analysts say achieving fiscal balance will require a combination of expenditure control and improved revenue mobilization.
