Deloitte East Africa has offered a cautiously positive view of Kenya’s 2026/27 budget, saying it supports economic growth even as the country faces pressure from rising debt and inflation.
In its review, the firm noted that the budget reflects the government’s effort to sustain growth without imposing additional tax burdens on businesses and households.
However, the analysts cautioned that progress could be undermined if reforms are not implemented consistently, especially given external economic uncertainties and domestic fiscal challenges.
Deloitte Signals Growth Momentum
Deloitte expects Kenya’s economy to continue expanding, projecting Gross Domestic Product (GDP) growth to increase from 4.6 percent this year to 5 percent in 2026. This outlook is based on continued activity across key sectors such as services, manufacturing, and agriculture.
Anne Muraya, Chief Executive Officer of Deloitte East Africa, said the country still benefits from strong underlying fundamentals.
These include a vibrant private sector, rapid adoption of digital technology, improving regional connectivity, and a youthful, skilled workforce, all of which support long-term growth prospects.
The firm also pointed to increased government spending in areas seen as critical for development. Education received the largest share at KSh 784.5 billion, while energy, infrastructure and ICT were collectively allocated more than KSh 531 billion, reflecting an intention to strengthen productivity and economic capacity.
Also Read: Treasury PS Kiptoo Backs Ruto’s Government on New Budget
On taxation, Deloitte observed that the government largely refrained from introducing new levies that could provoke public or business backlash.
Fred Omondi, a Tax and Legal Partner at Deloitte East Africa, said this approach offers some relief, though he expects more enforcement to drive revenue collection.
He indicated that authorities are likely to place greater emphasis on compliance and administrative efficiency rather than new tax measures to meet fiscal targets.
Deloitte Flags Debt and Inflation Risks Despite Positive Budget Outlook
Even so, the firm warned that inflationary pressures remain a concern. It forecasts inflation rising to 5.7 percent next year, partly driven by global factors, including geopolitical tensions that may increase fuel and fertilizer costs.
Gladys Makumi, Deloitte East Africa’s Strategy, Risk and Transactions Partner, said higher transport costs will affect the broader economy by pushing up the prices of goods and services, ultimately increasing the cost of living.
Public debt is projected to reach 68.8 percent of GDP, while the fiscal deficit is expected to stand at KSh 1.146 trillion. Deloitte cautioned that if revenue collection falls short, the government may resort to additional borrowing, including borrowing for recurrent spending.
Omondi warned that such a scenario could intensify pressure on public finances and complicate efforts to manage debt effectively.
To maintain growth momentum and attract investment, the firm called for stricter fiscal discipline, consistent policy implementation and a predictable regulatory environment.
It emphasized that confidence among investors and taxpayers depends on clarity and stability in government policy.
Walter Mutwiri, also a Tax and Legal Partner at Deloitte East Africa, noted that demonstrating value for money is essential in improving tax compliance.
He said individuals and businesses are more inclined to meet their obligations when they see tangible improvements in public services and economic opportunities.
Deloitte said the budget provides a workable framework for economic stability and growth, but stressed that outcomes will depend on careful execution, responsible debt management and steady policy direction.
Also Read: Mbadi Revives Debate to Merge Counties as CBK Downgrades Kenya’s Economic Growth
Kenya and Uganda Face Similar Budget Pressures Despite Different Growth Paths
Kenya and Uganda both unveiled ambitious budgets for the 2026/27 financial year as they deal with rising debt costs, global uncertainty and the need to support economic growth.
Kenya’s budget is about KSh 4.82 trillion, with a deficit of KSh 1.146 trillion, and public debt expected to rise to 68.8 percent of the economy.
Uganda, on the other hand, announced a record UGX 84.39 trillion budget (KSh2.9 trillion), a sharp increase from the previous year. The country is targeting economic growth of around 10.2 percent, driven largely by the expected start of commercial oil production.
Uganda’s public debt remains lower at about 52 percent of GDP, but debt servicing is a major concern.
Nearly 40 percent of the budget will go to debt repayments, limiting funds available for development projects.
Kenya’s strategy focuses on steady and stable growth, with the economy expected to expand by about 5 percent in 2026. Growth is being supported by strong performance in services, manufacturing and agriculture, alongside continued investment in digital technology.
The government has also prioritized education, allocating KSh 784.5 billion, and committed significant resources to infrastructure.
In addition, Kenya has largely avoided introducing new taxes, choosing instead to improve revenue collection through better enforcement.
Uganda is taking a different approach, aiming for faster growth by leveraging oil revenues. The government is also focusing on agro-industrialization, tourism, mineral development, and infrastructure to boost economic activity and create jobs.
While this could accelerate growth, it also exposes the economy to risks tied to global commodity prices and project delays.
Follow our WhatsApp Channel and X Account for real-time news updates.
