Kenya Projects Budget Deficit to Drop to 3.5% of GDP in Next Fiscal Year

Kenya’s finance ministry projects the budget deficit will decrease to 3.5% of gross domestic product (GDP) in the 2025/26 fiscal year, down from 4.3% in the current fiscal year, according to a draft budget document.

In June, President William Ruto reversed tax hikes worth more than 346 billion shillings ($2.7 billion) following youth-led protests, which posed the biggest challenge to his presidency since taking office two years ago.

The tax increases were initially intended to boost revenue for the current fiscal year, but the government opted for spending cuts and additional borrowing after scrapping them.

The finance ministry further anticipates the budget deficit will shrink to 3.3% of GDP in the 2026/27 fiscal year, according to the draft budget outlook paper reviewed by Reuters on Tuesday.

($1 = 128.50 Kenyan shillings)

(Reporting by George Obulutsa; Editing by Alexander Winning and Ros Russell)