Kenya expects its budget deficit to widen to 5.3% of gross domestic product in the 2026/27 financial year, reflecting higher spending pressures even as the government maintains its commitment to fiscal consolidation, government officials said.
The projection was outlined by the National Treasury during the presentation of its medium-term fiscal framework, which showed the deficit rising from an estimated 4.9% of GDP in the current fiscal year. Treasury officials said the wider gap is driven by planned increases in infrastructure investment, social sector spending and higher debt servicing costs, as reported by Reuters.
The government said the deficit will be financed through a combination of domestic and external borrowing, with a preference for concessional loans to contain financing costs. The Treasury added that it is pursuing tax administration reforms and measures to expand the revenue base to gradually narrow the deficit over the medium term.
Analysts said the outlook highlights the tightrope Kenya must walk between supporting economic growth and restoring fiscal stability. Market analysts cited by Reuters said investor sentiment will depend on the government’s ability to follow through on spending controls and revenue reforms, particularly as engagement with multilateral lenders such as the IMF continues.
