Kenya Reduces Tax Revenue Target to Ksh2.4 Trillion, Increases Borrowing to Fund Infrastructure Projects
In a surprising fiscal shift, Kenya has lowered its tax revenue target and significantly increased borrowing to finance key infrastructure projects.
Treasury Cabinet Secretary John Mbadi made the announcement through a gazette notice, confirming a new tax collection target of Ksh2.4 trillion for the 2024/2025 financial year. This is 3% lower than the previously revised target of Ksh2.475 trillion.
Deadly Protests Force Economic Rethink
According to Mbadi, this decision was largely influenced by the deadly Gen Z-led protests triggered by the now-abandoned 2024 Finance Bill.
“This economy was shut for two months. That affected revenue collection,” Mbadi told lawmakers earlier this week.
Borrowing Deepens
With the economic slowdown, the government is now turning to both domestic and international lenders. Mbadi revealed that net domestic borrowing will rise by 46% to Ksh597.2 billion.
Even more concerning, foreign loans are projected to hit Ksh718.4 billion, a jump of 20% from the initial estimate.
However, the borrowing spree comes at a cost. A recent IMF report classified Kenya as being at high risk of debt distress, raising alarm among economists and global lenders.
Breaking from IMF’s Grip
In another unexpected move, Kenya walked away from the final review of a $3.6 billion IMF program that ended this month. The country forfeited about $850 million in financing.
Explaining the decision, Prime Cabinet Secretary Musalia Mudavadi defended the shift.
“Some of the targets were extremely steep,” he said. “If you are unrealistic with your projections, you end up exerting a lot of pressure on your economy and your people.”
Mudavadi confirmed that talks for a new three-year IMF deal will begin soon, with completion expected by November. However, he did not disclose details of the upcoming agreement.
Facing Tough Financial Realities
“We have to come to terms and discuss these new realities,” Mudavadi added. “We must project based on actual numbers and not fantasy.”
While the new direction offers flexibility, it also brings uncertainty. Many are watching closely to see how the government will juggle development goals, growing debt, and social unrest—all while global economic tensions persist.
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Kenya Reduces Tax Revenue Target to Ksh2.4 Trillion, Increases Borrowing to Fund Infrastructure Project
