Kenya’s proposed 2026/27 budget is facing mounting criticism after a fresh report warned that the country is increasingly trapped between lofty policy goals and harsh fiscal realities, placing healthcare, social welfare and climate action under growing pressure.
The Institute of Public Finance (IPF), in its 2026 Annual National Shadow Budget, paints a sobering picture of a government grappling with shrinking fiscal room, rising debt repayments and weakening control over public spending despite ambitious policy commitments.
At the heart of the report is concern over what analysts term an “overly ambitious” fiscal strategy, where revenue targets are repeatedly missed, forcing the government into constant expenditure adjustments and unplanned spending under Article 223. According to the IPF, this trend is steadily weakening accountability and undermining parliamentary oversight.
The report notes that over half of government expenditure is now tied up in fixed obligations including debt repayment, salaries for public workers and county transfers, leaving minimal space for development projects and social programmes.
“Kenya’s challenge today is not a lack of policy ambition, but a widening gap between planning and realistic financing,” said IPF Chief Executive Daniel Ndirangu.
Healthcare has emerged as one of the sectors most exposed to the crisis. Critical programmes targeting HIV/AIDS, malaria and maternal health continue to rely heavily on donor financing, with development partners previously covering nearly 73% of expenditure in some areas.
However, donor funding is steadily declining, with recent bilateral support estimated to have dropped by about 20%, creating a potentially dangerous funding shortfall that could derail essential health services and jeopardise the rollout of Universal Health Coverage.
The report also highlights inefficiencies within Kenya’s social protection framework. The Hunger Safety Net Programme currently serves only 22.5% of vulnerable households, while overlapping bursary schemes have been blamed for duplication, leakages and unequal distribution of resources.
“In social protection, we have multiple bursary schemes operating simultaneously, resulting in duplication, leakages and inequitable access,” Ndirangu noted.
Although the government has repeatedly pledged support for Women’s Economic Empowerment initiatives, the report says funding remains insufficient and poorly monitored, limiting meaningful impact despite budget absorption rates surpassing 90%.
Climate financing has suffered an even sharper decline. Allocations have fallen from KSh11.6 billion in the 2020/21 financial year to just KSh4.3 billion in 2024/25, a fraction of the estimated KSh570 billion Kenya requires annually to meet its climate obligations. Current allocations amount to less than 2% of the required funding.
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The IPF further points to structural weaknesses in Kenya’s revenue system, including a narrow tax base and an agricultural sector that remains largely untaxed. The country is also increasingly vulnerable to external shocks such as geopolitical instability in the Middle East and heavy election-cycle spending.
Coupled with mounting debt servicing costs, these pressures are tightening the government’s fiscal position and limiting its ability to cushion the economy during periods of instability.
The institute is now calling for a major rethink of the 2026/27 budget, urging the government to adopt realistic revenue projections, tighten expenditure controls and reduce dependence on supplementary budgets.
Among its recommendations are increased domestic financing for healthcare, a clear transition strategy away from donor dependence, streamlined social protection programmes, institutionalised gender-responsive budgeting and stronger investment in climate adaptation measures.
The IPF also wants Parliament to play a firmer oversight role in enforcing fiscal discipline and ensuring public funds are channelled into programmes that deliver measurable public benefit.
Meanwhile, the report underscores widening pressures across the wider economy, from fragile SACCO funding structures and mounting refugee support costs to inflation driven by rising transport fares. Somewhere in Treasury, one suspects calculators are now being pressed with the same desperation as elevator buttons during a blackout.
