Overall, Budget 2025/26 reflects efforts towards fiscal consolidation as the fiscal deficit to GDP ratio is expected
to reduce from 9.9% in revised budget 2024/25 to 8.7% in FY 2025/26. Achievement of fiscal consolidation,
among other things is predicated on rationalization of expenditure and improved revenue collection. Without a
more deliberate and coherent approach, there are risks that may impede the realization of this goal.
The flexibility of the budget is increasingly becoming limited, despite the expected decline in growth of
Consolidated Fund Service (CFS) by 6% in 2025/26 from the previous financial year. There is a growing
pressure from the so called ‘priority’ expenditure items due to the way budgets are formulated. They
include: the total consolidated wage bill exacerbated by collective bargaining agreements, transfers to state
owned enterprises (SOEs) and earmarked funds such as Constituency Development Funds that together
will take up a substantial portion of the projected resource envelope. For 2025/26 they are estimated
to constitute about Ksh 2.8 trillion against an overall projected resource envelope of Ksh 3.4 trillion.
To this end, enhanced budget control measures are an imperative as is government’s rein on recurrent
expenditure through SOEs and public wage policy reforms.
