Kenya expects its budget deficit to widen to 5.3% of gross domestic product (GDP) in the 2026/27 fiscal year, which runs from July to June, up from a projected 4.7% in 2025/26, the finance ministry said on Friday, according to Reuters.
The latest estimate marks an increase from the ministry’s November forecast, when the deficit for 2026/27 was put at 4.9% of GDP, while the 2025/26 shortfall was estimated at 4.8%.
According to the ministry, the revised projections are based on “the projected revenue and expenditure framework.”
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Kenya’s economy has faced pressure in recent years due to heavy debt repayments following increased borrowing to finance large infrastructure projects, a situation that has pushed the government to pursue fiscal consolidation.
In its draft 2026 budget policy statement, the ministry said the deficit would be financed through net external borrowing of 99.5 billion shillings, equivalent to $772.52 million, alongside net domestic financing of 1.01 trillion shillings.
This financing plan differs from the projections made in November, when the ministry said it intended to fund the 2026/27 deficit with net external financing of 241.8 billion shillings and net domestic financing of 775.8 billion shillings.
Kenya’s constitution requires a detailed, multi-stage budget preparation process that includes consultations between the finance ministry, lawmakers, and the public, with final approval by parliament expected in June.
As a result, deficit estimates often change during periodic reviews leading up to the final budget presentation.
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Image Credit: Reuters
