IPF Kenya Shadow Budget 2026/27 Calls for Fiscal Discipline, Realistic Revenue and High-Impact Spending
Institute of Public Finance CEO, Daniel Ndirangu speaking at event on Tuesday 28, 2026 held in Nairobi.
Nairobi, Kenya – April 28, 2026 – Kenya’s ability to deliver on its development priorities is under growing strain due to an increasingly unrealistic fiscal framework, according to the 2026 Annual National Shadow Budget released by the Institute of Public Finance (IPF).
The report raises concerns over widening gaps between policy ambition and available resources, warning that this disconnect is undermining the sustainability, efficiency and overall impact of public spending across key sectors.
Budget credibility under pressure
IPF notes that Kenya’s budget credibility is weakening, driven in part by the frequent use of Article 223 of the Constitution to approve unplanned expenditures. This practice, the report says, weakens fiscal planning, oversight and accountability.
At the same time, overly optimistic revenue projections, rising debt servicing costs and weak expenditure discipline are limiting the government’s capacity to finance its development agenda.
“Kenya’s challenge today is not a lack of policy ambition, but a growing disconnect between what we plan and what we can realistically finance,” said Daniel Ndirangu.
Pressure mounts across key sectors
The shadow budget highlights mounting risks in critical sectors as follows;
Health: Heavy reliance on donor funding continues to threaten sustainability. In the 2023/24 financial year, donor support accounted for about 73 percent of funding for programmes such as HIV/AIDS, malaria and RMNCAH. With bilateral support declining by an estimated 20 percent, a significant financing gap is emerging, putting essential services and Universal Health Coverage at risk.
Social Protection: Coverage remains limited, with programmes like the Hunger Safety Net Programme reaching only 22.5 percent of households in need. Fragmented bursary schemes are also driving duplication, inefficiencies and inequitable access.
“We have multiple bursary schemes operating in parallel, leading to duplication, leakages and inequitable access,” Ndirangu noted.
Women’s Economic Empowerment: Despite strong policy commitments and high absorption rates, funding allocations remain low and poorly tracked, limiting measurable impact.
Climate Adaptation:Domestic financing has dropped sharply from KSh 11.6 billion in 2020/21 to KSh 4.3 billion in 2024/25 far below the estimated KSh 570 billion annual requirement under national climate commitments. Current allocations account for less than 2 percent of what is needed.
Shrinking fiscal space
On the expenditure side, rigid obligations including debt servicing, public wages and transfers to counties now consume more than half of total spending. This has significantly reduced fiscal space for development investments.
The report further points to the repeated use of supplementary budgets and overlapping mandates across sectors as key drivers of inefficiency and duplication.
Call for reforms
IPF is urging the government to use the 2026/27 budget to restore fiscal discipline and realign spending with high-impact priorities.
“Government of Kenya to use the FY 2026/27 budget to restore fiscal discipline and refocus spending on high-impact priorities by adopting realistic revenue projections, enforcing hard spending ceilings and limiting use of supplementary budgets,” IPF calls.
The institute also calls for increased domestic health financing supported by a clear transition plan from donor funding, stronger and better-coordinated social protection systems, institutionalized gender-responsive budgeting and the integration of climate adaptation financing across sectors.
Parliament is also being challenged to enhance oversight and reprioritize public spending toward programmes that deliver tangible social and economic outcomes.
The shadow budget concludes that while Kenya has made strong policy commitments in areas such as healthcare, social protection, climate resilience and economic inclusion, current fiscal structures lack the coherence and discipline needed to translate these ambitions into meaningful results.
