Ruto's Sh4.7tr strategy to stifle discontent

President William Ruto's embattled administration has unveiled a Sh4.7 trillion budget plan for the 2026/27 fiscal year.

The high-stakes electoral blueprint is designed to balance the demands of a fiscally constrained government against the immediate needs of restless Kenyans ahead of the August 2027 General Election.

The Budget Policy Statement (BPS), the fourth under the Kenya Kwanza administration, lays bare the embattled president's strategy.

According to the document reviewed by the Financial Standard, the plan marks a pivot from years of painful austerity toward targeted spending on jobs, youth and small businesses—all while seeking to reassure investors that he remains committed to fiscal discipline.

With opinion polls showing the cost of living and unemployment as the defining issues for voters, Ruto is walking a delicate line, analysts say.

An Infotrak poll released in December showed 46 per cent of voters rank the cost of living as the top factor deciding their choice in 2027, followed by youth unemployment at 25 per cent.

The 2026 BPS, approved by the cabinet last week, is seen as the administration's answer to that discontent. Total expenditure is projected at Sh4.7 trillion, a Sh62 billion increase from earlier drafts.

Recurrent expenditure dominates at Sh3.46 trillion, while development spending has been trimmed to Sh749.5 billion. Transfers to county governments—the political engines of local politics—have been hiked by nearly Sh50 billion to Sh495.7 billion.

"We are transitioning from fiscal stabilisation to scaled-up investment to drive the next phase of economic growth," the cabinet noted in a dispatch, framing the budget as a deliberate departure from the strict consolidation that has characterised Ruto's first term.

With just 18 months until the election, the Ruto administration is betting that targeted spending on youth and small businesses—putting cash directly into the pockets of young entrepreneurs through the NYOTA programme.

He is also subsidising fertiliser for millions of farmers, and scaling the Hustler Fund—combined with a slight easing of domestic borrowing pressure, hoping it will soothe a population weary of tax hikes and a high cost of living.

The risk, as analysts note, is that the heavy hand of debt servicing and the slow pace of job creation in the formal sector could undermine these efforts.

Budget documents show the Ruto government has placed a massive bet on agriculture, increasing sector financing by Sh3.8 billion to Sh77.7 billion for the current fiscal year, up from Sh73.9 billion previously.

The allocation is intended to strengthen the entire agricultural value chain—from production to market access—while improving food security and boosting job creation, officials say. 

The Ruto government has already disbursed three million bags of fertiliser to reach seven million farmers ahead of the long rains beginning in March.

The 2026 Long Rains National Fertiliser Subsidy Programme targets distribution of 12.4 million bags throughout the year, with prices capped at Sh2,500 per bag—a 62 per cent reduction from 2022 levels.

Total government investment in fertiliser acquisition and subsidy has reached Sh40 billion since 2022. "The programme avails 2.3 million tonnes of assorted fertiliser and 40,000 tonnes of agricultural lime to 4.4 million smallholder farmers nationwide," the BPS states.

"This intervention addresses persistent soil fertility constraints while making critical inputs affordable to resource-constrained farmers."

The strategy also focuses heavily on the "hustler" demographic that formed Ruto's political base during the previous elections that ushered him into power.

The government has begun the second phase of business start-up capital disbursement under the National Youth Opportunities Towards Advancement (NYOTA) Project, targeting nearly 50,000 vulnerable youth entrepreneurs across 27 counties.

Each beneficiary receives Sh22,000 deposited into their Nyota Pochi la Biashara wallet, alongside Sh3,000 saved under the Haba na Haba account managed by the National Social Security Fund (NSSF).

In the second phase, beneficiaries will receive another Sh25,000, bringing the total start-up capital to Sh50,000.

President Ruto personally launched the disbursement for Machakos, Makueni and Kitui counties, injecting Sh147.5 million to support 5,901 youth enterprises.

"Through the NYOTA Project, we are ensuring that young people in every part of Kenya have a fair chance to access capital, grow enterprises and create jobs," Ruto said.

"Each of Kenya's 1,450 wards will benefit, with between 70 and 84 young people accessing the Sh50,000 business grant."

A total of 12,155 beneficiaries in the Western Kenya cluster received Sh303.9 million in November 2025. The second phase now covers 27 counties, including Uasin Gishu, Elgeyo Marakwet, Nandi, Trans-Nzoia, Turkana, West Pokot, Nakuru, Narok, Bomet, Kericho, Baringo, Laikipia and Isiolo.

Others are Samburu, Nyeri, Murang'a, Kirinyaga, Nyandarua, Meru, Tharaka Nithi, Embu, Machakos, Kitui, Makueni, Nairobi, Kiambu and Kajiado.

Beyond financing, beneficiaries undergo a two-month mentorship programme delivered by business development experts and local entrepreneurs.

This is in addition to continuous technical support to ensure business grants are utilised strictly in line with approved business plans.

The government says the Hustler Fund has already disbursed Sh72 billion through the Financial Inclusion Fund and Sh4.86 billion in industrial credit via Stawi and Inua Biashara between 2022 and 2025, creating thousands of jobs in manufacturing and value-added agricultural processing.

The Credit Guarantee Scheme will be expanded to facilitate Sh50 billion in lending by commercial banks to over 200,000 enterprises.

The energy, infrastructure and ICT sector's budget will grow from Sh504.6 billion in 2025/26 to Sh597.3 billion in 2027/28. 

The government says it has laid 7,152 kilometres of fibre, digitised 17,668 government services on eCitizen, and onboarded more than 1.5 million young people into digital skilling programmes, with over 182,000 already accessing online jobs.

The government now plans to install 37,645 kilometres of backbone fibre optic network, extend high-speed internet connectivity to 18,680 public institutions nationwide, and install 27,516 public Wi-Fi hotspots.

The JamboTel secure communication system will be deployed to all government institutions, enhancing coordination and reducing communication costs.

In the energy sector, the government plans to increase national power generation capacity by an additional 10,000 megawatts through geothermal, wind, solar and hydroelectric projects over the next seven years.

A total of 1,185,481 new customers have been connected to electricity, including 2,082 public facilities such as schools, health centres and administrative offices, while 27,027 street lighting points have been installed.

The education sector has been allocated Sh723.9 billion in 2025/26, rising to Sh847 billion in 2027/28.

The Ruto Cabinet has approved a comprehensive package of education reform bills, marking a far-reaching overhaul of Kenya's education system to align governance, curriculum, assessment, financing, teacher training and qualifications with the Constitution and the Competency-Based Education and Training framework, officials say. 

The government has recruited over 150,000 teachers on permanent terms alongside 46,000 intern teachers, significantly improving teacher availability across schools.

An additional 3,300 trainers have been recruited to enhance instructional capacity.

The Digital Learning Programme will expand technology-enabled learning, benefiting both TVET and university students, with 100 centres equipped with modern facilities and industry-aligned curricula, with the capacity to train 200,000 youth annually.

Analysts say the political messaging is, however, running headlong into fiscal reality. 

Despite the talk of scaled-up investment, the Ruto budget is still anchored by a Sh1.115 trillion deficit (5.3 per cent of GDP). The government has reduced the development budget by Sh9.6 billion compared to previous plans, highlighting tight fiscal constraints.

In a significant shift, his Treasury has reversed its borrowing strategy. Initial plans to borrow Sh1 trillion domestically have been walked back to Sh890.4 billion, while external borrowing has more than doubled to Sh225.5 billion. Treasury CS John Mbadi said the move aims to ease pressure on local interest rates and free up credit for businesses.

Debt service costs continue to strangle fiscal space. Servicing public debt is expected to consume a massive Sh1.54 trillion, limiting the government's ability to fund new programs.

Consolidated Fund Services—comprising domestic interest, foreign interest, and pensions for state officers—is taking about 48.5 per cent of ordinary revenue in FY 2025/26, up from just 16.4 per cent in 2013/14.

To finance this transformation, the government has approved the establishment of the National Infrastructure Fund and the Sovereign Wealth Fund, expected to mobilise Sh5 trillion through domestic resources, asset monetisation and private sector participation, leveraging up to Sh10 for every shilling invested.

Privatisation proceeds will be directed to food security, infrastructure expansion and energy-driven industrialisation.

The new Ruto spending plan has drawn sharp scrutiny from fiscal watchdogs. Controller of Budget Dr Margaret Nyakango warned that the renewed engagement with the IMF, while necessary, risks tipping into damaging austerity if social spending is not protected.

"Macroeconomic stability is necessary, but it is not sufficient," Nyakango said recently. "Fiscal consolidation is essential, but it must be fair, well sequenced and people-centred."

The Institute of Public Finance (IPF) echoed these concerns, noting that while headline gross domestic product (GDP) growth is projected at a respectable 5.3 per cent for 2026, this stability has not translated into better living standards.

The IPF flagged that total real wage earnings per employee actually fell by four per cent between 2022 and 2024, eroding purchasing power despite easing inflation.

"There is a disconnect," the IPF stated. "For many Kenyans, stability has meant higher costs of living, shrinking real incomes, limited job opportunities and declining access to essential public services."