The Kenya Kwanza government promised to implement budget neutrality as a fiscal strategy to ensure there is no increase in overall government expenditure.
While the government has made progress in reducing the fiscal deficit as a percentage of GDP and is actively enhancing revenue mobilization, its total expenditure, particularly recurrent spending and costly debt servicing, continues to grow, necessitating further borrowing.
As part of Kenya’s fiscal consolidation effort the government aims to reduce the fiscal deficit from 5.7% of GDP in FY 2024/25 to 4.8% of GDP in FY 2025/26.
Despite efforts to prioritize spending through strategies like zero-based budgeting and scrutinizing ministry expenditure, persistent revenue shortfalls, high debt servicing costs, and challenges in controlling overall spending have led to a continued reliance on borrowing to fund the budget deficit. This reality falls short of the initial commitment to a balanced budget with no increase in overall government expenditure.
