The Institute of Public Finance faults state for repeatedly allocating taxpayer funds to underperforming and inefficient programs, warning that Kenya’s 2025/26 KSh 4.3 trillion budget risks offering low returns on public resources without urgent reforms in planning and execution.
In a critical analysis of public expenditure trends ahead of the June 2025 budget reading, IPF highlights systemic issues that continue to plague Kenya’s fiscal framework. These include low development budget absorption, a ballooning stock of pending bills now at KSh 706 billion, and overlaps across government functions.
Budget Increase and Debt Burden
The 2025/26 budget is projected at KSh 4.3 trillion, a 10% rise from the revised KSh 3.9 trillion budget in FY 2024/25. However, the Budget Policy Statement (BPS) also reveals growing pressure from debt servicing, which is expected to consume over KSh 1.37 trillion, posing a significant constraint on development spending.
Inefficiencies in Key Sectors
The IPF’s audit of Key Performance Indicators (KPIs) paints a troubling picture. In the education sector, despite being one of the largest recipients of public funds, learning outcomes remain poor, and Competency-Based Curriculum (CBC) reforms continue to stall. The State Department for Higher Education and Research had a development budget absorption rate of just 49% in FY2023/24.
Similarly, in the General Economic and Commercial Affairs (GECA) sector, the State Department for Investment Promotion and tourism suffer from high recurrent administrative costs and stagnant results in employment and visitor growth. IPF criticizes the lack of performance-based budgeting, noting that many low-performing programs continue receiving funds without evaluation.
Call for Strategic Reforms
“These inefficiencies undermine service delivery and slow progress on key national priorities,” said the Institute of Public Finance during the presentation of its National Shadow Budget for FY2025/26. The think tank emphasized the need to align resource allocation with performance, especially as the government navigates a tight fiscal environment.
Praise for Zero-Based Budgeting
Despite the criticisms, IPF commended the government’s adoption of zero-based budgeting and recent enforcement of Public Investment Management (PIM) regulations. If fully implemented, these policies could significantly enhance transparency, efficiency, and outcome-based allocations.
By addressing long-standing inefficiencies, the IPF believes Kenya can better align its budget with its socio-economic transformation goals, improve public service delivery, and build fiscal resilience in the face of growing debt obligations.
