KenyaThe Kenyan government is revising its fiscal strategy for the 2025/26 financial year by lowering its tax revenue target and turning to increased borrowing to bridge a widening budget gap. The move follows the withdrawal of the controversial Finance Bill 2024, which aimed to raise Ksh346 billion ($2.3 billion) through tax hikes but was met with nationwide protests and public outcry.

As a result, the government has reduced its tax revenue projection to Ksh2.4 trillion—significantly lower than previous targets. In a bid to maintain momentum on infrastructure development, Kenya now plans to rely more heavily on debt financing.To offset the revenue shortfall, Kenya has secured $600 million in short-term funding from commercial banks to support road construction projects. This loan, backed by fuel levy collections, enables the Kenya Roads Board to borrow at more favorable interest rates.

Moreover, the government is exploring additional financing options, including a potential $1.5 billion syndicated loan or private bond, to fund further infrastructure projects.

While these measures are intended to sustain economic growth and development, they have sparked concerns over the growing public debt and the country’s long-term economic stability. Economists warn that the government must tread carefully to balance public service delivery with prudent financial management.