Kenya’s National Treasury has been hit hard by a staggering Sh136 billion revenue shortfall, tearing gaping holes in funding for vital programs like infrastructure, healthcare, education, and social safety nets. This fresh blow, reported by The Star on January 30, 2026, piles onto an already brutal fiscal reality where debt servicing devours massive chunks of collected taxes, leaving little for development.
The Kenya Revenue Authority (KRA) continues struggling to meet ambitious targets. Half-year collections to December 2025 reached only Sh1.161 trillion against a required Sh1.314 trillion – a Sh152 billion miss in some disclosures – despite a strong December surge of Sh307.6 billion (108% of monthly target). Cumulative shortfalls stem from high living costs squeezing taxpayers, persistent evasion, a narrow tax base, and sluggish economic growth.
Treasury officials point to declining ordinary revenues amid tough headwinds, forcing heavier reliance on borrowing. This widens budget deficits and risks stalling the Bottom-Up Economic Transformation Agenda through delayed projects or harsh austerity.
Kenya’s debt crisis shows no quick exit. Public debt servicing already claims over 30–48% of revenues – far above regional peers – with external vulnerabilities lingering. IMF and World Bank assessments flag high distress risks, with key ratios like debt-to-exports breaching sustainable thresholds potentially until 2037, and debt-to-GDP staying elevated beyond current targets of 55% ±5% by 2028.
Projections in the Budget Policy Statement eye ordinary revenue climbing to Sh2.9 trillion in 2026/27 and total revenues hitting Sh3.5 trillion. Yet without aggressive reforms – expanding the tax net, cracking down on evasion via digital tools, and spurring private-sector growth – the squeeze intensifies, hiking borrowing costs and threatening stability.
This revenue blow isn’t isolated; it’s symptomatic of deeper structural woes. As borrowing fills gaps, future generations face prolonged debt burdens stretching well past 2030. Urgent, credible fixes are essential to restore fiscal health, rebuild taxpayer confidence, and prevent a full-blown crisis that could derail Kenya’s long-term prospects.
