Shrinking fiscal space forces State to push PPPs

State agencies will no longer receive budget allocations for projects that can be funded through public-private partnerships (PPPs), Treasury Cabinet Secretary John Mbadi has said.

He stressed that ministries, departments and agencies (MDAs) must also provide clear evidence of public participation before any funding requests are approved.

Speaking in Nairobi on Monday during the launch of the 2026-2027 and medium-term budget preparation process, Mbadi said government resources are limited and MDAs must shift towards innovative financing methods.

He pointed out that PPPs will now be the first option for projects with commercial potential.

“I want MDAs to embrace PPPs. Before you ask us for extra budgetary allocations, exhaust the possibility of raising funds through PPP, especially for commercially viable projects,” he said.

Mbadi gave examples of the Rironi–Mau Summit Highway and the Galana Kulalu project, which have been undertaken under PPP arrangements, saying the government must expand such models due to the shrinking fiscal space.

He also urged county governments to develop projects that can attract private investment.

“I want to encourage all the MDAs, including county governments, to come up with projects that can be funded through PPP,” he added.

The CS further said public participation will be a mandatory requirement for funding, with agencies expected to involve all stakeholders before submitting their requests.

“All your requests (MDAs) should be subjected to the test (public participation). If you are not conducting public participation, I am sorry, you may not get the resources you are requesting from the National Treasury,” said Mbadi.

Kenya projects to collect Sh3.4 trillion in ordinary revenue in the 2026-2027 financial year, slightly higher than the Sh3.3 trillion expected in the current year.

This will amount to 17.7 per cent of the gross domestic product, compared to 17.2 per cent in the 2025-2026 fiscal period.

Treasury Principal Secretary Chris Kiptoo said the country’s fiscal pressures have cut down allocations to development, with the share falling from 21 per cent in previous years to 9.2 per cent of the budget.

“Government-funded development projects have declined. Now, instead of the 21 per cent we used to enjoy, only 9.2 per cent of our budget is going to development,” he said.

Kiptoo added that much of the revenue is being used to pay loans and pensions.

“Interest rates and pensions are taking up 48.5 per cent of ordinary revenue,” he said, noting that this had risen sharply from 16 per cent in 2013.