The National Treasury Cabinet Secretary John Mbadi is expected to table his first supplementary budget for the present 2026/27 financial year in November amid spending pressures and revenue underperformance.
The mini budget will factor in recently approved expenditures by the Cabinet, including the settlement of pending bills below Sh50 million, increasing overall spending for the financial year ending on June 30, 2027.
“We are hoping that in the supplementary budget coming in the next three weeks, we will be making submissions on how to clear most of the pending bills,” Chris Kiptoo, the National Treasury Principal Secretary, told the Finance and National Planning Committee of the National Assembly on Tuesday.
“We are devising a way to pay pending bills but are yet to decide whether we securitise the arrears or pay them through the budget.”
The mini budget plans come amid tightened fiscal positions, with Kenya’s budget deficit projected at 5.5 percent of GDP or Sh1.14 trillion for the 2026/27 fiscal year before rising to 5.9 percent in 2027/28.
At present, spending for the fiscal year to June 2027 is estimated at Sh4.81 trillion against Sh3.63 trillion in projected revenues.
Earlier this month, the Cabinet approved the settlement of pending bills of Sh50 million and below.
The payment of bills valued at Sh50 million and under is expected to prioritize settlements to micro, small and medium enterprises, easing cash-flow pressures, protecting jobs and restoring confidence among suppliers and contractors.
The National Treasury has so far cleared pending bills estimated at Sh80 billion in the roads sector, through the securitisation of the road maintenance levy fund, which is funded through a Sh25 charge on every litre of petrol and diesel sold at the pump.
Cabinet approved other expenditures which are likely to feature in the upcoming secondary budget, including the bailout for beleaguered national carrier Kenya Airways (KQ).
The Cabinet approved a Sh45.5 billion ($350 million) shareholder financing to the flag carrier, to meet urgent financial obligations, including aircraft maintenance and returning grounded planes to service.
The Cabinet meeting also proposed the conversion of Sh122 billion in existing government loans to equity to strengthen KQ’s balance sheet and support future capital raising.
The National Treasury has noted heightened demands for funding by various ministries and State departments, even as revenue underperforms, pointing to difficulties in maintaining fiscal consolidation and stopping the runaway growth of public debt which has surpassed the Sh13 trillion mark as of August 2026.
“The problem right now is that spending pressures are very high. I am getting requests every now and then from MDAs asking for more money, but we are unable to raise corresponding revenues,” added PS Kiptoo.
The Kenya Revenue Authority (KRA) recorded a Sh58.2 billion revenue shortfall in the first quarter of the current fiscal year, even as the ordinary revenue growth accelerated from the same stage last year.
The revenue shortfall, which has been persistent, points to the setting of overambitious collection targets.
Ordinary revenue receipts, which include both tax and non-tax revenues, were recorded at Sh655.8 billion, which was higher by 14.4 percent from Sh573.5 billion collected in the same period in 2025.
Domestic revenue collection, however, significantly recovered from the previous year when receipts contracted by 2.9 percent in the opening quarter of the 2025/26 fiscal year.
“By the end of September 2026, revenue collection was below target by Sh40.4 billion mainly on account of shortfalls in ordinary revenues of Sh58.2 billion while ministerial appropriations in aid (A-i-A) surpassed the target by Sh17.8 billion,” the National Treasury noted in a prior presentation.
Total revenues are expected to reach Sh3.63 trillion by June next year, from Sh3.19 trillion previously, and will include Sh2.985 trillion in ordinary revenues or taxes, collected by KRA, and Sh644.8 billion in ministerial A-i-A.
The new supplementary estimates are expected to factor in changes in revenue expectations by the National Treasury.
