The Kenyan government has announced that it will reduce its fiscal deficit to 4.5 percent of its Gross Domestic Product (GDP) for the 2025/2026 financial year. This is a step down from the 5.1 percent recorded in the previous year. The new target was revealed after a cabinet meeting led by President William Ruto. The government is also planning to revise the national budget, which was initially set at 4.3 trillion Kenyan shillings (about $33 billion). These moves are part of a broader effort to manage rising public debt, improve government spending, and ensure more funds are available for essential services like education, health, and infrastructure.
The fiscal changes are coming after a tough year for the country. In 2024, Kenya witnessed widespread protests, especially from youths and civil society groups, who kicked against a plan to introduce about $2.7 billion in new taxes. The protests, which were largely driven by frustrations over high cost of living and claims of government waste, forced President Ruto to cancel the tax increases and delay plans to cut the budget deficit further to 3.5 percent. The protests turned violent in some areas and led to the death of over 50 people, according to reports from human rights groups.
In response to the crisis, the Kenyan cabinet has now approved the Finance Bill 2025. The bill is expected to close tax loopholes, improve collection, and make the country’s finances more efficient. The country’s Finance Minister, Mr. John Mbadi, has also called on citizens to share ideas on how the government can raise more money through new laws without putting more pressure on the poor.
Meanwhile, Kenya’s relationship with the International Monetary Fund (IMF) remains tense. Earlier this year, the IMF and Kenya paused the final review of a $3.6 billion support package. The IMF has now asked the Kenyan government to come up with a fresh spending plan before any further funds can be released. The government has since made a request for a new support arrangement from the Fund.
However, before any new IMF deal is approved, Western countries are asking Kenya to undergo a special audit known as a “governance diagnostic.” This is a type of review carried out by the IMF to assess issues of corruption, accountability, and transparency in a country’s public sector. The IMF has done similar reviews for countries like Ukraine, Cameroon, and Sri Lanka. The idea is to ensure that any funds given to Kenya will be properly managed and not wasted or misused.
Western diplomats say the IMF is delaying the release of a $600 million disbursement because of concerns around corruption and poor management. Protesters in Nairobi and other parts of Kenya had accused politicians of living large while citizens struggle with poor services and rising inflation.
Experts say the only way for Kenya to win back the trust of investors and the IMF is to come up with a strong and believable plan to reduce its budget deficit, cut waste, and boost revenue collection. There is growing pressure on the government to carry out real reforms and show results, not just make promises.
As Kenya looks to stabilise its economy, many observers believe that what happens in the next few months will determine whether the country can avoid another financial crisis. The next steps will likely involve difficult decisions on taxes, public spending, and possibly even subsidy reforms. The government is walking a tightrope as it tries to keep the country afloat while maintaining public support.
