President William Ruto chaired a Special Cabinet meeting on Tuesday at State House, Nairobi, where the Cabinet approved the 2025 Budget Policy Statement (BPS), outlining a KSh4.2 trillion budget for the 2025/26 financial year.
According to the statement, which will now be submitted to Parliament, the budget represents 22.1 percent of Kenya’s Gross Domestic Product (GDP). It includes KSh3.09 trillion for recurrent expenditure, KSh725.1 billion for development, KSh436.7 billion for county transfers, and KSh5 billion for the Contingency Fund.
Under the proposed Division of Revenue Bill 2025, the National Government plans to allocate KSh2.8 trillion as shareable revenue. County governments will receive KSh405.1 billion as an equitable share and an additional KSh10.6 billion under the Equalisation Fund. The total allocation to counties represents 25.8 percent of the most recent audited revenue of KSh1.57 trillion from the 2020/21 financial year.
The County Allocation Revenue Bill 2025 will distribute these funds using the Third Basis Formula, while the County Governments Additional Allocation Bill 2025 proposes an extra KSh69.8 billion—KSh12.89 billion from the National Government and KSh56.91 billion from development partners. In total, counties will receive KSh474.87 billion in the 2025/26 financial year.
The 2025 BPS highlights key economic priorities, including sustaining economic growth, ensuring fiscal stability, and promoting inclusive green development.
Under the Bottom-Up Economic Transformation Agenda, the government projects GDP growth to stabilize at 5.3percent in 2025 and 2026, following a rebound to 5.6 percent in 2023, largely attributed to improved agricultural performance after prolonged drought.
To sustain growth, the government has identified six main priorities: reducing the cost of living, eradicating hunger, creating jobs, expanding the tax base, improving foreign exchange balances, and fostering inclusive economic growth. These objectives will be pursued through strategic investments in key sectors, improved market access, and increased local and foreign investment.
The government also plans to implement fiscal consolidation measures to reduce debt vulnerability while ensuring essential public services are adequately funded. This will involve expenditure rationalization, revenue mobilization, and enhanced tax compliance.
The Medium-Term Revenue Strategy will guide tax reforms, focusing on expanding the tax base, leveraging technology for efficiency, sealing revenue loopholes, and maximizing non-tax revenues.
Public finance management reforms will include the adoption of zero-based budgeting, a shift to accrual-based accounting, and full implementation of the Treasury Single Account to enhance cash flow management.
Additionally, the government will strengthen the Integrated Financial Management Information System (IFMIS) and increase reliance on public-private partnerships (PPPs) to improve service delivery.
Cabinet also approved the 2024/25 Supplementary Estimates No. II, allowing for an additional KSh344.8 billion in government spending. This includes KSh199.0 billion for recurrent expenses and KSh145.8 billion for development projects. The funds will be used to support government and donor-funded projects, personnel costs, and budget realignments.
The decision follows economic disruptions in mid-2024, when widespread protests in June, July, and August led to the withdrawal of the Finance Bill 2024. The bill had initially proposed raising KSh344.3 billion in additional revenues but faced public opposition.
Key measures include exempting all African citizens from Electronic Travel Authorization (ETA) requirements and raising the duty-free threshold for goods brought into Kenya from KSh50,000 to KSh250,000.
Security screening procedures will be streamlined, with risk-based profiling to reduce unnecessary manual inspections. The number of immigration booths and staff will be doubled, and new E-Gates will be introduced to speed up passenger clearance.
Additionally, JKIA infrastructure will be upgraded, including modernized baggage handling systems, improved stormwater drainage, enhanced air conditioning, clearer signage, and installation of covered walkways.
To enhance security, all airport staff and concessionaire employees will be required to wear uniforms with visible name tags.
Cabinet also approved several host country agreements to bolster Kenya’s role as a regional hub for international organizations. These include partnerships with the International Institute for Democracy and Electoral Assistance, Save the Children International, Shelter Afrique Development Bank, Oxfam International, Norwegian Refugee Council, and Population Services International.
Additionally, Cabinet ratified an agreement with Singapore to eliminate double taxation and prevent fiscal evasion, aiming to strengthen trade and investment ties.
In a move to boost Kenya’s aviation sector, the government also endorsed plans for the country to host the International Air Transport Association (IATA), reinforcing its commitment to international cooperation and economic diplomacy.
President William Ruto chaired a Special Cabinet meeting on Tuesday at State House, Nairobi, where the Cabinet approved the 2025 Budget Policy Statement (BPS), outlining a KSh4.2 trillion budget for the 2025/26 financial year.
According to the statement, which will now be submitted to Parliament, the budget represents 22.1% of Kenya’s Gross Domestic Product (GDP). It includes KSh3.09 trillion for recurrent expenditure, KSh725.1 billion for development, KSh436.7 billion for county transfers, and KSh5 billion for the Contingency Fund.
Under the proposed Division of Revenue Bill 2025, the National Government plans to allocate KSh2.8 trillion as shareable revenue. County governments will receive KSh405.1 billion as an equitable share and an additional KSh10.6 billion under the Equalisation Fund. The total allocation to counties represents 25.8% of the most recent audited revenue of KSh1.57 trillion from the 2020/21 financial year.
The County Allocation Revenue Bill 2025 will distribute these funds using the Third Basis Formula, while the County Governments Additional Allocation Bill 2025 proposes an extra KSh69.8 billion—KSh12.89 billion from the National Government and KSh56.91 billion from development partners. In total, counties will receive KSh474.87 billion in the 2025/26 financial year.
Economic Growth and Fiscal Policies
The 2025 BPS highlights key economic priorities, including sustaining economic growth, ensuring fiscal stability, and promoting inclusive green development. Under the Bottom-Up Economic Transformation Agenda, the government projects GDP growth to stabilize at 5.3% in 2025 and 2026, following a rebound to 5.6% in 2023, largely attributed to improved agricultural performance after prolonged drought.
To sustain growth, the government has identified six main priorities: reducing the cost of living, eradicating hunger, creating jobs, expanding the tax base, improving foreign exchange balances, and fostering inclusive economic growth. These objectives will be pursued through strategic investments in key sectors, improved market access, and increased local and foreign investment.
The government also plans to implement fiscal consolidation measures to reduce debt vulnerability while ensuring essential public services are adequately funded. This will involve expenditure rationalization, revenue mobilization, and enhanced tax compliance. The Medium-Term Revenue Strategy will guide tax reforms, focusing on expanding the tax base, leveraging technology for efficiency, sealing revenue loopholes, and maximizing non-tax revenues.
Public finance management reforms will include the adoption of zero-based budgeting, a shift to accrual-based accounting, and full implementation of the Treasury Single Account to enhance cash flow management. Additionally, the government will strengthen the Integrated Financial Management Information System (IFMIS) and increase reliance on public-private partnerships (PPPs) to improve service delivery.
Supplementary Budget and Impact of 2024 Protests
Cabinet also approved the 2024/25 Supplementary Estimates No. II, allowing for an additional KSh344.8 billion in government spending. This includes KSh199.0 billion for recurrent expenses and KSh145.8 billion for development projects. The funds will be used to support government and donor-funded projects, personnel costs, and budget realignments.
The decision follows economic disruptions in mid-2024, when widespread protests in June, July, and August led to the withdrawal of the Finance Bill 2024. The bill had initially proposed raising KSh344.3 billion in additional revenues but faced public opposition.
JKIA Passenger Experience Overhaul
During the meeting, Cabinet also approved a comprehensive plan to improve passenger experience at Jomo Kenyatta International Airport (JKIA). Key measures include exempting all African citizens from Electronic Travel Authorization (ETA) requirements and raising the duty-free threshold for goods brought into Kenya from KSh50,000 to KSh250,000.
Security screening procedures will be streamlined, with risk-based profiling to reduce unnecessary manual inspections. The number of immigration booths and staff will be doubled, and new E-Gates will be introduced to speed up passenger clearance.
Additionally, JKIA infrastructure will be upgraded, including modernized baggage handling systems, improved stormwater drainage, enhanced air conditioning, clearer signage, and installation of covered walkways. To enhance security, all airport staff and concessionaire employees will be required to wear uniforms with visible name tags.
Strengthening Kenya’s Global Economic Ties
Cabinet also approved several host country agreements to bolster Kenya’s role as a regional hub for international organizations. These include partnerships with the International Institute for Democracy and Electoral Assistance, Save the Children International, Shelter Afrique Development Bank, Oxfam International, Norwegian Refugee Council, and Population Services International.
Additionally, Cabinet ratified an agreement with Singapore to eliminate double taxation and prevent fiscal evasion, aiming to strengthen trade and investment ties.
In a move to boost Kenya’s aviation sector, the government also endorsed plans for the country to host the International Air Transport Association (IATA), reinforcing its commitment to international cooperation and economic diplomacy.
