Parliament watchdog pokes holes into Ruto's unrealistic budget math
Business
By
Brian Ngugi
| Oct 29, 2025
The Kenya Kwanza administration’s fiscal outlook for the coming year faces significant risks from what the Parliamentary Budget Office (PBO) terms as “overly optimistic” revenue targets, an increased dependence on domestic borrowing that could squeeze private sector credit, and persistent growth in mandatory spending.
In its latest Budget Watch report, the independent PBO, which advises lawmakers, expressed serious doubts about President William Ruto government’s ability to meet its ambitious revenue collection goal. The office warned that consistent revenue shortfalls and a narrow, overburdened tax base could threaten the credibility and sustainability of the national budget.
The critique comes as the government seeks to narrow the fiscal deficit to 4.8 per cent of GDP from 5.8 per cent in the previous year while still funding its ambitious "Bottom-Up" development agenda.
The budget watchdog raised concerns over the CS John Mbadi-led Treasury’s revenue forecast of Sh3.4 trillion for the 2025/26 fiscal year.
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The PBO noted a persistent mismatch between revenue growth and the expanding economy, which it said “underscores the persistent challenge of broadening the tax base and integrating the informal sector.”
The office highlighted the Kenya Revenue Authority's (KRA) consistent failure to meet targets, noting that “historical KRA shortfalls threaten budget credibility.”
Achieving the new target, the PBO says, will require intensified efforts in tax policy and administration, a task that may be difficult given its recent performance.
The report also addressed the government's new, less aggressive tax strategy.
Following public backlash, the Ruto government says it is now prioritising administrative reforms over new taxes.
The PBO warned that the success of this approach “will ultimately depend on how effectively these reforms are executed.”
The PBO at the same time singled out several specific tax measures for criticism.
It warned that a new five per cent withholding tax on all betting “withdrawals” including a player's original stake, not just their winnings, could “drive players away from formal betting platforms, as many casual and small-scale bettors might be discouraged by the prospect of losing part of their initial deposits even without making a profit.”
This, the office said, risks hurting industry growth and ultimately undermining the very revenue goals the government intends to achieve.
While a new requirement for importers to present a certificate of origin is designed to combat undervaluation and fraud, the PBO is skeptical.
It cautioned that if not properly implemented, the measure may only add another layer of bureaucracy without meaningfully improving revenue collection.”
On expenditure, the PBO raised alarm about the government’s continued reliance on costly domestic borrowing to finance the Sh931.1 billion fiscal deficit.
Net domestic borrowing is projected at Sh643.3 billion, which the report said “may exert upward pressure on interest rates, crowd out private sector credit, and heighten refinancing risks.”
The report also highlighted an “unsustainable” rise in non-discretionary spending, particularly on the interest payments and pensions.
"While the government is cutting discretionary expenditures, these mandatory costs are rising, and are likely to negate the expected gains from the reforms,” the PBO stated.
The PBO provided a damning assessment of the state corporation sector, which it noted consumes over 17 per cent of government revenues but contributes only 3.5 per cent to the GDP of Kenya, against 14 per cent in Sub-Saharan Africa.”
These entities it noted are plagued by “inefficiencies, overlapping mandates, and reliance on the Exchequer,” with pending bills reaching Sh121 billion.
The PBO’s analysis also presents a more cautious economic outlook than the Treasury, projecting growth of 5.1 per cent for 2025/26 compared to the government's 5.3 per cent forecast. It cited downside risks including volatile weather affecting agriculture and potential spillovers from global protectionist trade policies.