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Government and Policy

Key Take-outs From The Draft 2025 Budget Policy Statement That You Need To Know

BY Soko Directory Team · January 20, 2025 10:01 am

According to the National Treasury, total revenue inclusive of Ministerial Appropriation in Aid is projected to increase by 14.9% to Kshs 3.5 tn from Kshs 3.1 tn as per FY’2024/25 revised budget estimates, with proposals such as expanding the tax base and improving tax compliance already in place to work towards increasing the amount of revenue collected in the next fiscal year.

At the same time, the 2025 BPS points to a 11.6% increase of the total expenditure, to Kshs 4.3 tn from Kshs 3.9 tn in the FY’ 2024/25 revised budget estimates.

Development expenditure is set to increase at a higher rate than recurrent expenditure; with development expenditure increasing by 34.2% to Kshs 804.7 bn from Kshs 599.5 bn as per the supplementary budget II, while recurrent expenditure is projected to increase by 8.9% to Kshs 3.1 tn from Kshs 2.8 tn as per the FY’2024/25 supplementary budget II. However, the recurrent expenditure will still constitute the largest allocation of 71.1% while development will be allocated 18.6%.

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The budget deficit is projected to decline by 1.2% to Kshs 759.5 bn (3.9% of GDP) in FY’2025/2026, from the projected Kshs 768.5 bn (4.4% of GDP) in the FY’2024/25 revised budget; the decline is in line with the International Monetary Fund’s (IMF’s) recommendation for fiscal consolidation, as the country seeks to reduce Kenya’s public debt requirements.

The total borrowing requirement is expected to decline by 1.2% to Kshs 759.5 bn from Kshs 768.5 bn as per the FY’2024/25 revised budget, in a bid to reduce Kenya’s public debt burden which is estimated at 65.5% of GDP as of June 2024, 15.5% points above the East African Community (EAC) Monetary Union Protocol, the World Bank Country Policy and Institutional Assessment Index, as well as, the IMF threshold of 50.0%.

Debt financing for the 2025/26 budget is estimated to consist of 28.1% foreign debt and 71.9% domestic debt, a change from the 46.3% foreign debt and 53.7% domestic debt as projected in the revised FY’2024/25 budget, pointing towards increased domestic borrowing.

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