The government’s first supplementary budget for the 2025–26 financial year will push total spending up by Sh262.9 billion as weak revenue collection squeezes the Exchequer. Revised Treasury estimates now place total expenditure for the year ending June 30 at Sh4.532 trillion, up from Sh4.269 trillion approved in the original budget.
Most of the increase comes from recurrent expenditure, which is set to rise by Sh204.6 billion to Sh3.338 trillion, reflecting persistently high wage bills, allowances and day-to-day operating costs. Development spending will increase by Sh58.3 billion to Sh707.3 billion.
The expanded spending plan will widen the fiscal deficit from Sh901 billion to Sh1.14 trillion, equivalent to six percent of GDP, up from 4.7 percent. Budget execution data for the first half of the fiscal year shows recurrent spending overshot targets, largely due to higher costs for operations, maintenance and debt servicing, while development spending and transfers to counties lagged behind.
Treasury data shows total expenditure and net lending stood at Sh2.02 trillion by December 2025, below the Sh2.09 trillion target, mainly because of under-disbursement to development projects and county governments. Development spending fell short by Sh33 billion, while transfers to counties were Sh50.4 billion below target due to delayed releases. In contrast, recurrent spending exceeded projections by Sh10.9 billion.
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The higher spending pressures are colliding with weak revenue performance, meaning the government will need to borrow more to cover the gap. By the end of December 2025, total revenue, including Appropriations in Aid, reached Sh1.5 trillion against a target of Sh1.637 trillion.
Revenue fell short by Sh136.1 billion, driven mainly by underperformance in ordinary tax collections of Sh115.3 billion and a Sh20.8 billion shortfall in ministerial appropriations. Ordinary revenue stood at Sh1.236 trillion compared with a target of Sh1.351 trillion, with all tax categories except import duty missing targets.
To finance the wider deficit, the Treasury plans to rely more heavily on domestic borrowing, raising the net domestic borrowing target by Sh272.4 billion from Sh613.5 billion to Sh885.9 billion.
