Revealed: How much Govt plans to borrow for Sh5.4 trillion 2027/28 Budget as deficit widens

Kenya’s proposed national budget for the 2027/28 financial year has risen to Sh5.416 trillion, with the National Treasury projecting a fiscal deficit of Sh1.353 trillion as the government prepares to increase expenditure while pursuing revenue-collection reforms.

The Draft 2027 Budget Policy Statement (BPS) projects total expenditure and net lending at Sh5.4155 trillion, equivalent to 23.6 per cent of gross domestic product (GDP), up from Sh4.8194 trillion in the 2026/27 financial year.

The projected deficit, including grants, is expected to reach 5.9 per cent of GDP, compared with 5.5 per cent in the current financial year.

According to the National Treasury, the government plans to finance the shortfall through Sh929.1 billion in net domestic borrowing and Sh423.8 billion in net external borrowing.

The proposals are contained in the draft policy statement for the 2027/28–2029/30 medium-term budget framework, which outlines the government’s spending, revenue and borrowing projections.

Despite the increase in the overall budget, the Treasury has projected lower development expenditure than in its earlier Draft Budget Review and Outlook Paper.

Development spending for 2027/28 is now projected at Sh915.8 billion, down from Sh958 billion in the earlier projections cited in the review of the draft budget.

Recurrent expenditure, which covers the government’s day-to-day operations and other ongoing obligations, is projected at Sh4.021 trillion, equivalent to 17.5 per cent of GDP.

This is the first time the projected recurrent expenditure has crossed the Sh4 trillion mark.

In addition, transfers to county governments are projected at Sh473.5 billion, while Sh5 billion has been allocated to the Contingency Fund.

The increase in overall expenditure alongside the lower development-spending projection highlights the competing demands on public resources as the government seeks to maintain essential services while containing debt accumulation.

The government projects total revenue, including Appropriation-in-Aid, at Sh4.004 trillion in 2027/28, compared with Sh3.631 trillion in the current financial year.

Ordinary revenue is expected to account for Sh3.249 trillion, up from a projected Sh2.986 trillion in 2026/27.

The Treasury says revenue performance will be supported by tax-policy and revenue-administration reforms intended to broaden the tax base and improve compliance.

The government’s fiscal strategy centres on restraining expenditure and strengthening revenue mobilisation as it pursues fiscal consolidation.

According to the draft, the approach is intended to moderate the pace of public debt accumulation while protecting the delivery of essential public services.

The Treasury has also projected a gradual reduction in the fiscal deficit over the medium term, from 5.9 per cent of GDP in 2027/28 to 5.4 per cent in 2028/29, 5.1 per cent in 2029/30 and 4.9 per cent in 2030/31.

Members of the public, county governments, constitutional commissions and other interested stakeholders have been invited to submit comments on the draft Budget Policy Statement.

The consultation is required under Section 25 of the Public Finance Management Act, 2012, which provides for stakeholder and public input during the preparation of the BPS.

According to the public notice, comments should be submitted to bps@treasury.go.ke by close of business on October 28, 2026.

The Treasury says the 2027 Budget Policy Statement will be submitted to Parliament by November 16, 2026, under a revised budget calendar intended to accommodate the General Election scheduled for August 2027.

The proposed figures remain estimates in a draft policy document and may change as the budget process proceeds.