A delay by the government in releasing its share of funding could stall projects worth Sh2.2 trillion, the Parliamentary Budget Office (PBO) has warned. The shortfall of Sh130 billion in counterpart funding with external partners threatens to slow down or block 234 new and ongoing projects across the country.
The PBO said delays in providing the government’s portion could also push external creditors and donors to shift funds to off-budget programmes, which are harder to track.
In its report on budget implementation for the 2025/26 fiscal year, the office notes that these projects are currently relying on Sh2.17 trillion in loans and grants from foreign partners, but these depend on the government fulfilling its funding obligations.
“With regards to Official Development Assistance (ODA) resources channelled and managed through the annual budgeting process, recent estimates put Kenya’s overall ODA portfolio at Sh2.2 trillion, comprising of Sh1.9 trillion as loans and Sh251 billion as grants, if shortfalls in counterpart funding (GOK share) are fully provided,” the PBO said.
The counterpart funding system requires the government to lead by providing cash or resources to kick-start projects. This can include activities like purchasing land where a road or facility is to be built, before external partners release their funding.
According to the PBO, more than a third of the government’s development budget this year is expected to come from loans and grants from bilateral and multilateral partners.
The government’s development budget for 2025/26 stands at Sh744.8 billion, with Sh258.4 billion (34.7 percent) expected from lenders. This is slightly lower than the Sh278 billion from external sources allocated in the previous fiscal year.
“However, low absorption, weak coordination, and contractual challenges continue to limit effectiveness, causing delays, reduced drawdowns, and diluted impact, while increasing the risk of partners shifting resources,” the report notes.
The office further warned that while ODA remains crucial for financing development projects, bureaucratic and fiscal delays have left billions of shillings from donors and creditors unused, creating a risk that funds may be diverted to less visible off-budget activities.
These include programmes managed directly by funders or contracted entities, such as Global Fund projects for tuberculosis, malaria, HIV and AIDS treatment, and health initiatives supported by the Global Alliance Vaccine Initiative.
