The Kenyan government has significantly increased tax-funded development expenditure, which rose by 36.4 percent to Sh457.2 billion in the financial year ending June 2026. This marks the fastest growth in over ten years and signals a renewed focus on infrastructure investment ahead of the 2027 General Election.

This surge reverses a prolonged period of budget cuts that saw capital spending shrink to less than 10 percent of total national government expenditure. The additional Sh122.1 billion allocated compared to the previous year reflects the administration’s commitment to fast-tracking projects under President William Ruto’s Bottom-Up Economic Transformation Agenda and the Vision 2030 development blueprint.

Priority Sectors and Spending Focus

  • Roads: The largest beneficiary, with funding increasing by 44.2 percent to Sh92.3 billion. This boost supports the resumption of stalled road projects delayed by unpaid contractor bills during previous fiscal consolidations.
  • Agriculture: Funding for crop development jumped 82 percent to Sh45.7 billion, underscoring efforts to enhance food security through initiatives like fertiliser subsidies.
  • Water and Sanitation: Recorded the fastest growth, with allocations more than doubling to Sh34.5 billion.
  • Energy: Development funding rose 34.8 percent to Sh22.7 billion, supporting electricity infrastructure and power transmission projects.

The government has also maintained financing for counterpart funding necessary to unlock loans and grants from development partners, while channeling resources towards social equity, environmental conservation, and regional integration programmes.

Challenges and Outlook

Despite the increase, development expenditure remains below historical levels, representing just 10.97 percent of the Sh4.17 trillion national government spending in 2025/26—less than half the share recorded a decade ago. This highlights the continued dominance of recurrent costs in the budget.

Moreover, the Treasury has acknowledged challenges in meeting the Public Finance Management Act requirement that development spending, including partner contributions, should constitute at least 30 percent of total expenditure. Actual development outlays fell short of this target due to expenditure rationalisation measures during budget execution.

Persistent delays in project implementation and low absorption rates have further hampered progress, with the Parliamentary Budget Office pointing to procurement and execution bottlenecks that stall key infrastructure projects despite increased funding.

Nonetheless, the recent surge in tax-funded development expenditure signals a strategic push to complete ongoing infrastructure works that can spur economic growth, create jobs, and reduce poverty ahead of the upcoming elections.