Sh4.24 trillion budget under scrutiny: Revenue gaps, development delays raise red flags
Gathungu criticized the government’s failure to meet revenue collection goals and its weak enforcement of tax laws, which undermine the Sh4.24 trillion budget’s viability.
Kenya’s 2025-26 national budget faces serious fiscal challenges, Auditor General Nancy Gathungu has revealed, warning that unrealistic revenue targets and poor spending performance threaten to push the country into deeper debt and stall key government programs.
Presenting her findings to Parliament’s Budget and Appropriations Committee, Gathungu criticized the government’s failure to meet revenue collection goals and its weak enforcement of tax laws, which undermine the Sh4.24 trillion budget’s viability.
The government’s revenue target of Sh2.76 trillion falls below the World Bank’s recommended tax-to-GDP threshold of 15 percent, with Gathungu attributing this gap to weak enforcement, tax evasion, and poor forecasting.
She noted that revenue collection has consistently missed targets over the past five years, with the 2023-24 fiscal year alone falling short by Sh170 billion.
Tax arrears have skyrocketed to Sh2.33 trillion, a 133% increase from the previous year, revealing systemic weaknesses.
Gathungu warned, "The KRA’s targets are disconnected from reality," adding that the high level of uncollected revenue forces the government to rely on borrowing.
Kenya’s public debt is already at Sh11.1 trillion, and the Auditor General cautioned that continuing revenue shortfalls will lead to costly loans that further burden taxpayers.
Development spending, a crucial part of the budget, also faces serious setbacks.
Despite a budget allocation of Sh643.9 billion for development, this represents only 25.8% of national expenditure, below the 30% legal minimum.
The actual absorption of funds has been declining, with only 29% of the Sh708.8 billion development budget spent in 2023-24. Many projects remain unfinished or delayed, and some have accumulated unpaid bills.
Donor-funded projects are also underperforming. Fourteen projects worth Sh515 billion had only 41% of their funds spent by mid-2024, with Sh304 billion left unused.
This poor uptake has resulted in a penalty charge of Sh6.57 billion for undrawn loans since 2020.
The Mombasa Gate Bridge project is a glaring example, with 98% of funds still undrawn despite spending Sh938 million, highlighting inefficiencies that waste public resources.
The Auditor General’s report is a stark reminder that without addressing fiscal indiscipline, poor revenue management, and development delays, Kenya risks compromising essential public services and increasing the debt burden on its citizens.
