The Departmental Committee on Finance and National Planning has raised concerns over a persistent shortfall in revenue targets set against projected expenditure increases for the 2026/27 Financial Year (FY).
Legislators voiced these concerns during a consultative forum with officials from the State Department for National Treasury, led by Principal Secretary Dr. Chris Kiptoo.
In a session chaired by Hon. Kuria Kimani (Molo), lawmakers flagged a revenue deficit of KES 111 billion as of December 2025. The Committee sought to understand the measures the Ministry has implemented to ensure that future revenue projections are based on realistic targets.
“The Cabinet Secretary has already pronounced himself on the government’s plan to reduce PAYE. How will manage this when we haven’t even been meeting our revenue projections every year?”, Hon. Kimani asked.In response, PS Kiptoo revealed that the Ministry has allocated an additional KES 20 billion to the Kenya Revenue Authority (KRA) for FY 2026/27 to bolster tax collection efforts.
“Hon. Chair and Members, the issue of meeting revenue projections is among the outstanding issues that we are dealing with. We have allocated KRA an additional 20b in the next Financial Year to bolster their efforts in revenue collection," the PS stated.Regarding the broader fiscal framework, PS Kiptoo informed the Committee that total revenue for FY 2026/27, including Appropriation-in-Aid, is projected at KES 3,533.7 billion (16% of GDP). Of this, ordinary revenue accounts for KES 2,901.9 billion (13.9% of GDP).
Conversely, total expenditure is projected at KES 4,703.9 billion, categorized as follows:Recurring Expenditure-KES 3,456.9 billion; Development Expenditure-KES 749.5 billion, County Transfers-KES 495.5 billion and Contingency Fund-KES 2.0 billion.
The resulting fiscal deficit of KES 1,115.8 billion (including grants) will be financed through net external financing of KES 225.5 billion and net domestic financing of KES 890.4 billion.
The PS further noted that the State Department for National Treasury faces a projected budget gap of KES 25,150.5 million, arising from discrepancies between the Budget Policy Statement (BPS) and the PAIR Sector allocations.
“Chair and Hon. Members, the National Treasury was allocated a total of KES 157,607.3m by the PAIR Sector while BPS allocation is KES 132,456.8m in the 2026BPS for FY 2026. The variation of KES 25,150.5m is mainly attributed to budget rationalization due to tight fiscal framework and indeed affect the National Assembly aspirations and plans”, he explained.Beyond internal figures, the PS highlighted that Kenya’s presence on the FATF Grey-list poses significant risks to investor confidence and international finance access due to gaps in the Anti-Money Laundering and Counter-Terrorist Financing (AML/CTF) frameworks.
He also cited the low absorption of donor funds by Ministries, Departments, and Agencies (MDAs) as a persistent challenge.
This revelation drew Members interest on the matter. Hon. Julius Rutto (Kesses) and Hon. Umulkheir Kassim (Mandera County) expressed concern over the underutilization of grants, noting that this trend has persisted for two years.
“These grants Chairperson are free money. How are MDAs unable to utilise them? This situation is repeated from the last two financial years, especially where there was no matching fund from the government. Can the PS explain where the challenge stems from”, Hon. Kassim sought to know.The Member for Butula added that expenditure growth is not aligned with revenue trends, urging the Treasury to scrutinize the wish lists of government agencies more strictly.
“Every year we have expenditure rising over revenue growth. On the other hand, Kenyans are hard pressed because of high taxes. We must into ways of controlling our budget, and we don’t have to honour every expenditure presented by spending ministries”, he stated.Addressing these concerns , PS Kiptoo noted, “We need to push more revenue because our expenditures are more rigid. For instance Education now takes 28 per cent of the budget. We have a tight fiscal space and we need to have a conversation on this.”
The meeting concluded with an update on pending bills following inquiries from Hon. Kimani and Hon. Shadrack Mwiti (Imenti South). Dr. Kiptoo revealed that the verification committee has completed its report.
“Out of the 664bn pending bills claims, 255bn was verified and recommended for settlement. KES 80b for the roads sector has already been settled through securitization and we are looking into raising funds to pay the balance of KES 175b”, he stated.Following the presentation, the Chairperson directed that the Committee holds a dedicated sitting with the National Treasury to conduct a deep review of the Department’s budget implementation.
