The government has approved an additional spending of Sh199.9 billion in the second supplementary budget.
This is more than the amount that the government said it had lost in its revenue projections for the financial year, following the withdrawal of the Finance Bill 2024.
From the proposed 2024/25 Supplementary Estimates No. II, Sh199 billion has been allocated for recurrent spending and Sh145.8 billion for development.
According to a cabinet dispatch from the statehouse, these funds will address government and externally financed projects, personnel emoluments, budget realignments, and revenue adjustments.
“The approval comes amid economic disruptions, including civil protests in June, July, and August 2024, which led to the withdrawal of the Finance Bill 2024. The bill had initially proposed raising Sh344.3 billion in additional revenues but faced strong public opposition,” read the dispatch from State House.
However, the government has not announced how it will be financed, considering the additional revenue via Tax Laws (Amendment) 2024 only targets Sh174.6 billion- far less than the newly approved spending increase.
Should the government fail to raise adequate financing, there is a likelihood of this move increasing the deficit further.
Meanwhile, the Cabinet also confirmed that the 2025/26 national budget has been set at Sh4.2 trillion. This marks a reduction of approximately Sh153 billion from earlier projections in the Draft BPS.
“The total expenditure, equivalent to 22.1 per cent of GDP, includes Sh3.09 trillion for recurrent spending, Sh725.1 billion for development, Sh436.7 billion in county transfers, and Sh5 billion for the Contingency Fund,” the cabinet memo says.
Under the Division of Revenue Bill 2025, the National Government proposes a shareable revenue of Sh2.8 trillion, with Sh405.1 billion allocated to county governments as an equitable share and Sh10.6 billion for the Equalisation Fund.
“The county allocation represents 25.8 per cent of the most recent audited revenue (Sh1.57 trillion from the 2020/21 financial year), aligning with constitutional requirements,” the report says.
The County Allocation Revenue Bill 2025 will distribute the county share based on the Third Basis Formula, while the County Governments Additional Allocation Bill 2025 proposes an extra Sh69.8 billion—Sh12.89 billion from the National Government and Sh56.91 billion from development partners. With these additional funds, total county transfers for 2025/26 will amount to Sh474.87 billion.
Despite the increase in spending, the government says it is still pushing on with its fiscal policy for 2025/26.
“This will be achieved through expenditure rationalization, revenue mobilisation, and enhanced tax compliance. The Medium-Term Revenue Strategy will guide tax reforms, ensuring efficiency, fairness, and progressivity while balancing revenue generation with social protection.”
The state says key measures include expanding the tax base, leveraging technology for tax efficiency, sealing revenue loopholes, and maximising non-tax revenues from ministries, departments, and agencies.
Further, the cabinet resolved that public finance management will be strengthened through zero-based budgeting, a transition to accrual-based accounting, and the adoption of the Treasury Single Account to improve cash flow management.
“The government will also fully operationalise IFMIS asset inventory management modules and scale up public-private partnerships (PPPs) to enhance private sector involvement in public service delivery,” it says.
