Treasury raises spending by Sh199.9 billion in mini Budget

The government plans to increase its spending for the current financial year by an additional Sh344.8 billion, eroding the budget cuts that it had made last August as it sought to reduce spending to cater for revenue shortfalls after the withdrawal of the Finance Bill 2024. 

The Cabinet yesterday approved the Second Supplementary Budget, in which it is seeking to spend Sh344.8 billion, which is almost equivalent to what the government said would be the revenue shortfall occasioned by foregoing the taxes that had been proposed in the Finance Bill.

The Sh344.8 billion will now raise the budget for the current year to well over Sh4.1 trillion, from the Sh3.8 trillion that was approved through the first Supplementary Budget.

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Following the rejection of the Finance Bill, 2024 after the Gen Z protests last year, the National Treasury had to draw up the first Supplementary Budget that factored in the missed revenues that would have been raised through tax measures contained in the Bill.

In the first mini Budget, overall spending was reduced to Sh3.8 trillion from Sh3.99 trillion, with development expenditure taking a major hit.

The government is, however, making an about-turn and is set to seek parliamentary approval in the second mini Budget, which increases spending by a similar amount that the rejected Finance Bill was expected to raise. 

“Cabinet also approved the proposed 2024-25 Supplementary Estimates No. II, authorising an additional Sh344.8 billion in expenditures, with Sh199.0 billion allocated for recurrent spending and Sh145.8 billion for development.

"These funds will address government and externally financed projects, personnel emoluments, budget realignments, and revenue adjustments,” said the Cabinet in a statement after a meeting in State House Nairobi yesterday.

“The approval comes amid economic disruptions, including civil protests in June, July, and August 2024, which led to the withdrawal of the Finance Bill 2024. The Bill had initially proposed raising Sh344.3 billion in additional revenues but faced strong public opposition.”

This could mean the government borrowing more, in addition to new revenues from tax measures implemented towards the end of last year. This comes amid continued concerns about the country’s debt sustainability and earlier plans to reduce the Budget deficit.

The government had expected the fiscal deficit – the money that it would borrow to plug the difference between revenues and the budget – to stand at Sh768.6 billion or about 4.3 per cent of the gross domestic product (GDP) over the current financial year.

It expects total revenues - which include what the Kenya Revenue Authority collects as well as money earned by ministries and other government agencies –  for the 2025-26 financial year to stand at Sh3.516 trillion. 

While the withdrawal of the Finance Bill 2024 calmed the protesters, the government has since then reintroduced some of the tax measures that had been contained in the Bill through other bills that have sailed through Parliament and signed into law.

During yesterday’s special meeting that was chaired by President William Ruto, the Cabinet also approved the 2025 Budget Policy Statement (BPS).

The BPS – which is a broad guide to government spending plans for the next financial year that starts July 1 this year – will now be forwarded to Parliament. It sets a Sh4.2 trillion budget for the 2025-26 financial year. 

The total expenditure, equivalent to 22.1 per cent of GDP, includes Sh3.09 trillion for recurrent spending, Sh725.1 billion for development, Sh436.7 billion in county transfers, and Sh5 billion for the Contingency Fund.

Under the Division of Revenue Bill 2025, the national government proposes a shareable revenue of Sh2.8 trillion, with Sh405.1 billion allocated to county governments as an equitable share and Sh10.6 billion for the Equalisation Fund.

The county allocation represents 25.8 per cent of the most recent audited revenue (Sh1.57 trillion from the 2020-21 financial year), aligning with constitutional requirements. 

The County Allocation Revenue Bill 2025 will distribute the county share based on the Third Basis Formula, while the County Governments Additional Allocation Bill 2025 proposes an extra Sh69.8 billion - Sh12.89 billion from the National Government and Sh56.91 billion from development partners. With these additional funds, total county transfers for 2025/26 will amount to Sh474.87 billion.

At the meeting, the Cabinet also endorsed a plan to improve passenger handling and infrastructure at Jomo Kenyatta International Airport (JKIA) by streamlining operations and bolstering security.

This follows the collapse of the deal with Adani Airport Holding that was to take over JKIA and operate it for three decades but the plan faced local opposition but also allegations of bribery by the company’s officials in other markets.

Cabinet said key changes in its plan to improve JKIA include exempting all African citizens from Electronic Travel Authorisation (ETA) requirements and easing intra-African travel. 

It also plans undertake upgrades of infrastructure at the airport including modernising baggage handling systems and improving stormwater drainage.

“Kenyan citizens will benefit from an increased duty-free threshold of goods brought into the country, which has now been increased from Sh50,000 to Sh250,000. Security screening at JKIA will be enhanced through risk-based profiling, ensuring only flagged bags undergo manual inspection in a dedicated screening room, reducing delays and improving efficiency,” said the statement. 

“To further expedite travel, the number of immigration booths and staff will be doubled, while E-Gates will be introduced to eliminate long queues and speed up clearance.

"Accountability measures will also be strengthened with new monitoring technology deployed to oversee airport staff, and mandatory uniforms with visible name tags required for all agency employees and retail concessionaires.”

“These measures take immediate effect, reinforcing JKIA’s position as a leading aviation hub by improving efficiency, security, and overall passenger experience.”