The government has announced a series of far-reaching austerity measures aimed at reducing the fiscal deficit to 4.5 percent of GDP in the 2025/26 financial year, down from 5.1 percent in the previous year. The move is part of a broader fiscal consolidation strategy to streamline public spending, reduce public debt, and stabilize the country’s economy.
In a statement issued following a Cabinet meeting chaired by President William Ruto in April, the government approved budgetary realignments to reinforce fiscal discipline and achieve long-term macroeconomic stability.
The Cabinet directed all ministries and state departments to conduct expenditure reviews and implement cost-cutting measures in close coordination with the National Treasury.“Revenue shortfalls, tax collection inefficiencies, and high debt servicing costs continue to constrain our fiscal space,” said a government spokesperson. “These measures are necessary to ensure sustainable public finances while safeguarding development priorities.”
To actualize the new fiscal path, the government announced the following cost-reduction initiatives:
1. Dissolution of at least 47 state corporations with overlapping mandates, with their functions to be absorbed into relevant ministries.
2. Suspension of the hiring of Chief Administrative Secretaries (CASs) to cut wage bill costs.
3. Reduction of government advisers by at least 50%.4. Elimination of budgets allocated to the Offices of the First Lady, Second Lady, and the Spouse of the Prime Cabinet Secretary.
5. Abolition of confidential budgets within executive offices to enhance transparency and curb misuse of funds.
6. Refinancing of international debt through concessional loans and green financing mechanisms to reduce borrowing costs.
According to the Treasury, these reforms are expected to not only reduce wasteful spending but also create fiscal space to enhance the delivery of essential public services such as healthcare, education, and infrastructure.
Looking ahead, the government has set an ambitious target to further shrink the fiscal deficit to 2.7 percent of GDP by the 2028/29 fiscal year as part of its long-term fiscal sustainability plan.
Economists have welcomed the proposed reforms but caution that successful implementation will require strong political will, institutional efficiency, and public support.
The new measures come at a time when Kenya faces mounting debt pressures, with debt servicing consuming a significant share of national revenue. The government hopes that by tightening expenditure and restructuring debt, it can restore economic stability and boost investor confidence.
