Kenya expects its budget deficit to narrow to 5.7% of gross domestic product in the 2027/28 financial year as the government targets stronger revenue collection and tighter control of public spending.
The projection represents an improvement from the wider deficit expected in the current fiscal year and forms part of the government’s medium-term plan to strengthen public finances and reduce pressure on borrowing.
Kenya’s National Treasury has been seeking to increase domestic revenue while restraining expenditure as it works to stabilise public debt. The government has also committed to improving tax administration and broadening the tax base to generate additional revenue without relying heavily on new borrowing.
The fiscal consolidation comes as Kenya faces elevated debt-servicing costs. Interest payments consume a significant share of government revenue, limiting the funds available for development projects and essential public services.
Treasury projections show that economic growth is expected to remain relatively strong, with real GDP growth estimated at about 5.3% in 2027/28. Stronger economic activity would support revenue collection and make it easier for the government to reduce the deficit without imposing severe spending cuts.
The government also expects expenditure as a share of GDP to decline over the medium term as it prioritises essential programmes and reduces lower-priority spending. The strategy is intended to improve fiscal sustainability while maintaining funding for infrastructure, healthcare, education and other development priorities.
Kenya’s fiscal position has come under increasing scrutiny from investors and international lenders after attempts to raise additional tax revenue triggered widespread protests and forced the government to withdraw some proposed measures. The episode highlighted the political difficulty of implementing fiscal consolidation in an economy where households are already facing high living costs.
The government has since shifted its focus towards improving compliance, reducing waste and strengthening revenue administration rather than relying solely on higher tax rates.
The projected reduction in the deficit would also support efforts to stabilise Kenya’s public debt. Treasury forecasts indicate that the ratio of government debt to GDP should gradually decline over the medium term if fiscal consolidation remains on track.
However, the projections remain exposed to risks including weaker economic growth, lower-than-expected revenue collection, higher global interest rates and unexpected spending pressures.
The Treasury has said the 2027/28 budget process will prioritise fiscal sustainability while supporting economic growth and employment. If the planned measures are implemented successfully, the narrower deficit could reduce Kenya’s borrowing requirements and create greater room for private-sector investment.
The government still faces the challenge of balancing fiscal discipline with demands for increased public spending, particularly ahead of the 2027 general election.
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Emmanuel Abara Benson is a business journalist and editor covering artificial intelligence, global markets, and emerging technology.
He has previously worked with Business Insider Africa and Nairametrics, reporting on finance, startups, and innovation.
His work focuses on AI, digital economy, and global tech trends.
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