Hard truths. Bold Insights. Real talk.
The allocations were published in a gazette notice dated February 6, 2026, where National Treasury Cabinet Secretary John Mbadi confirmed that the financing is sourced from the International Development Association-World Bank credit and will be directed to selected urban centres across the country.
Speaking at a leadership summit for National Assembly members in Naivasha, Treasury Principal Secretary Chris Kiptoo said the proposals form part of the National Tax Policy and Medium-Term Revenue Strategy.
Raphael Owino, Director General of Public Debt Management at the National Treasury, said the government plans to gradually reduce reliance on Treasury bills while increasing medium and long-term securities.
Despite these plans, the National Assembly’s Labour and Social Protection Committee has raised concerns that some elderly citizens, orphans, vulnerable children, and persons with severe disabilities may miss their monthly stipends unless the Treasury releases Sh16.958 billion under Supplementary Budget II.
In its draft 2026 Budget Policy Statement, the Treasury highlighted that introducing systems allowing voters to cast ballots remotely could face resistance and might not gain public support under the current circumstances.
The funding combines contributions from the World Bank, which is providing Sh5.7 billion through its International Development Association, KfW Germany contributing Sh1.2 billion, and Sh4.2 billion from the counties themselves.
Kenya Power has already completed talks with several Independent Power Producers to review Power Purchase Agreements that have long been blamed for driving up electricity prices. The new terms, which aim to cut tariffs and convert contracts from foreign currency to Kenya Shillings, were finalised during the financial year ending June 2025 and submitted to Treasury and Epra for review, according to the Auditor-General.
According to the National Treasury, the rollout of JamboTel will take place once the government completes its national fibre optic backbone, connecting every State office and institution to reliable internet.
Treasury Cabinet Secretary John Mbadi outlined the proposals, saying the changes followed discussions with the Salaries and Remuneration Commission and the Public Service Commission.
Treasury records indicate that Huduma Kenya Service (HKS) platforms served 14,121,167 customers during 2024/2025. The period also saw seven new Huduma Centres, funded through the National Government Constituencies Development Fund (NGCDF), become operational, expanding physical access to government services.
According to the draft document, which is yet to be submitted to Parliament, the allocations place heavy emphasis on development while maintaining large recurrent budgets to support ongoing programmes across the four sectors.
Treasury CS John Mbadi said the allocation represents 21.87 per cent of the most recent audited and approved national revenue, as provided under Articles 203 (2) and (3) of the constitution.
CS Mbadi highlighted that the government has been holding discussions with donors through the Deputy President’s office while reviewing the full project pipeline to determine which initiatives might lack real value. The review also addresses the problem of counterpart funding, which can attract high fees, adding unnecessary costs to taxpayers.
The National Treasury has released the draft 2026 Budget Policy Statement and invited public and stakeholder comments by January 9, 2026, in a key step shaping Kenya’s medium-term fiscal priorities.
Last month, the World Bank outlined seven laws and four policy reforms Kenya must implement before releasing the funds. Key requirements include amending the Competition Act to regulate firms with dominant market positions, allowing refugees to register for mobile telephony and M-Pesa, and introducing policies to reduce urban traffic congestion, including promoting rail transport.
Figures released by the Controller of Budget show that Nairobi County accounted for more than half of the outstanding debt, with total borrowings of Sh1.9 billion. The County Executive owed Sh1.5 billion, while the County Assembly had pending obligations amounting to Sh316.7 million by the close of the quarter.
During last year’s national wage bill conference, officials had warned of mass layoffs targeting support staff, casual workers, and employees with fake academic certificates. At the time, it was noted that support staff made up about two-thirds of public service employees, despite a recommended ratio of 70 percent technical staff and 30 percent support staff. This meant that roughly 702,950 of the 1.05 million public servants were support staff, more than double the ideal number.
According to the Public Finance Management Act 2012, government borrowing should be focused on development, while short-term loans like overdrafts are meant to manage cash flows. As of September, Kenya’s public debt stood at Sh12.05 trillion, with domestic borrowing accounting for more than half of the total.
The result is that the economy is now projected to grow by 4.9% this year, up from the World Bank's May forecast of 4.5%, and maintain that rate of growth over the next two years.
The Auditor General attributed the low absorption of 56.5% of the development budget by County Governments to unrealistic budget projections and delays in procurement processes. She said several other factors also disrupted implementation, including delays in exchequer releases, poor alignment between budget plans and cash flow, cuts introduced in Supplementary 1 Estimates, and instances of IFMIS downtime that affected operations.
According to the latest data from the National Treasury, net borrowing from domestic sources reached Sh339.7 billion, while external lenders contributed Sh98.1 billion. This represents nearly half (48.6%) of the annual borrowing target of Sh901 billion, which is set at Sh613.5 billion for local markets and Sh287.4 billion from external sources.
The Treasury had sought to suspend the High Court judgment issued on April 1, 2025, in Constitutional Petition No. E059 of 2024, arguing that it raised significant legal issues while the government prepared to appeal. The application relied on rule 5(2)(b) of the Court of Appeal Rules, which allows a temporary pause if certain conditions are met.
The National Assembly’s Special Funds Accounts Committee expressed frustration with CEO Henry Tanui, who could not provide the full records of borrowers, repayments, and fund disbursement, one year after queries were first raised.
Currently, failing to remit deducted contributions is not a criminal offence, and many pension schemes are underfunded as a result. Mbadi highlighted that numerous institutions owe retirees billions of shillings, creating a serious threat to the security of workers’ benefits.
The Public Accounts Committee (PAC), chaired by Vice Chairperson and Garissa County Woman Representative Amina Udgoon Siyad, scrutinized the Auditor General’s report, which highlighted irregular spending, unapproved transactions, and potential losses of taxpayer money. The audit revealed that the airline received Sh10 billion in 2022/2023 as an on-lent loan, taking the total funding between 2019 and 2023 to Sh41.27 billion.
The Banking (Penalties) Regulations, 2025, are now under review by the Parliamentary Committee on Delegated Legislation, as lawmakers prepare to scrutinise their potential impact on the financial sector.
The AfDB, in its report titled Unpacking the Drivers of Public Debt Dynamics in Kenya, notes that the National Assembly struggles to carry out proper oversight of public borrowing.
Treasury officials note that pennies, which honor President Abraham Lincoln and are composed of copper-plated zinc, now cost nearly four cents to produce—more than double their cost ten years ago. Eliminating production is expected to save approximately $56 million per year.
The Treasury’s latest annual monetary report shows that the value of on-lent loans now stands at more than Sh1 trillion, made up of Sh874.91 billion in donor-funded financing and Sh322 billion from the national government. Many of these loans, the report notes, have been poorly utilised, with some projects stalling or failing to start.
Treasury data shows that Kenya’s debt to the US dropped sharply to $185.47 million (Sh23.9 billion) by June, from $310.13 million (Sh40 billion) a year earlier. This reduction now places the US behind Belgium and Italy among Kenya’s bilateral lenders, marking a significant shift in debt structure.