Kenya’s 2026/27 budget is under fresh scrutiny after a new report warned that the country is drifting into a dangerous gap between ambition and affordability, threatening healthcare, social protection and climate resilience.
- •The 2026 Annual National Shadow Budget by the Institute of Public Finance (IPF) paints a stark picture of a government struggling to match bold policy promises with shrinking fiscal space, rising debt obligations and weakening budget discipline.
- •At the centre of the concern is what analysts describe as an “overly optimistic” fiscal framework, where revenue projections are routinely missed, forcing the State into frequent spending revisions and off-plan expenditures under Article 223, moves that the IPF says is eroding accountability and parliamentary oversight.
- •The report finds that more than half of government spending is now locked into rigid obligations such as debt servicing, public wages and transfers to counties, leaving little room for development and social programmes.
“Kenya’s challenge today is not a lack of policy ambition, but a growing disconnect between what we plan and what we can realistically finance,” said IPF Chief Executive Daniel Ndirangu.
The health sector faces one of the most immediate threats. Core programmes, including HIV/AIDS, malaria and maternal health, remain heavily donor-funded, with external support previously accounting for about 73% of spending.
But with donor flows already declining, recent bilateral funding estimated to be 20% lower, a major financing gap is emerging, putting essential services and the push for Universal Health Coverage at risk.
In social protection, the report flags widespread inefficiencies and duplication. The Hunger Safety Net Programme currently reaches just 22.5% of vulnerable households, while multiple parallel bursary schemes are blamed for leakages and inequitable access.
“In social protection, we have multiple bursary schemes operating in parallel, leading to duplication, leakages and inequitable access,” Ndirangu said.
Despite strong policy commitments, funding for Women’s Economic Empowerment remains low and poorly tracked, limiting real impact even where budget absorption exceeds 90 percent.
Climate financing is in even sharper decline. Allocations have fallen from KSh11.6 billion in 2020/21 to KSh4.3 billion in 2024/25, far below the estimated KSh570 billion annual requirement under Kenya’s climate commitments. Current spending accounts for less than 2% of what is needed.
Narrow Tax Base
The report also highlights structural weaknesses in revenue collection, including a narrow tax base and a largely untaxed agricultural sector, alongside growing exposure to external shocks such as geopolitical tensions in the Middle East and election-cycle spending pressures.
Combined with rising debt servicing costs, these risks are tightening the fiscal noose and limiting the government’s ability to respond to economic shocks.
IPF is now urging a reset in the 2026/27 budget, calling for realistic revenue projections, strict spending controls and reduced reliance on supplementary budgets.
It also wants increased domestic health financing, a clear transition plan away from donor dependence, streamlined social protection programmes, institutionalised gender-responsive budgeting and stronger investment in climate adaptation.
Parliament, the institute says, should take a more assertive role in enforcing discipline and ensuring public funds are directed to programmes that deliver tangible benefits.
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