Budget office warns of household strain under new policies

The Parliamentary Budget Office (PBO) has issued a warning about the rising financial pressure on Kenyan households, blaming the government for shifting key financial responsibilities onto citizens.

In its 2025/26 Budget Policy Statement, the PBO expressed concern that the government’s recent fiscal policies, such as changes in the funding of affordable housing, healthcare, and education, are straining families already grappling with stagnant wages and rising unemployment.

The PBO’s report highlights that the current government, under President William Ruto, has adopted an approach where essential programs are increasingly funded through additional household contributions rather than traditional government financing.

This shift has particularly impacted households by reducing their disposable income, which, in turn, affects overall demand in the economy.

In its analysis, the PBO outlines key changes, including the expansion of the affordable housing program, the introduction of a new social health insurance fund, alterations to the university funding model, and the adjustment of social security fund requirements.

"These changes could potentially reduce household disposable income, thus adversely impacting aggregate demand," the report warns.

The shift in policy direction under President Ruto stands in stark contrast to the approach taken by former President Uhuru Kenyatta, who sought to fund similar initiatives directly from the government’s public resources.

Under Kenyatta’s administration, efforts aimed at expanding affordable housing, improving healthcare access, and increasing funding for education were largely financed through state coffers.

However, the current administration has introduced significant changes that have placed a heavier burden on Kenyan families.

The introduction of a steep increase in National Social Security Fund (NSSF) deductions has been one of the most noticeable shifts.

The NSSF contribution has more than tripled, from Sh200 to a maximum of Sh4,320, depending on income levels.

This change is expected to raise significant funds but will also add to the financial strain on workers.

Additionally, the new university funding model has introduced higher fees and placed more responsibility on parents and students.

The shift from government funding to loans from the Higher Education Loans Board (HELB) has exacerbated the financial burden on families seeking higher education for their children.

Perhaps one of the most controversial measures has been the implementation of the Affordable Housing Act, which introduced a 1.5 percent income levy to fund the affordable housing program.

Employers are required to match this levy, creating a dual financial obligation for households.

This measure has drawn criticism for further squeezing household budgets, especially in light of the ongoing economic challenges.

The PBO report also notes that the rapid expansion of the affordable housing program has slowed private investments in the construction sector.

"The anticipated active role of public investment in the construction industry may have slowed down private investments in the sector, thereby reducing the overall contribution of the sector to the GDP," the report points out.

As these policies unfold, Kenyan households are facing an increasingly heavy financial burden, with the PBO urging the government to rethink its approach to funding essential public services.