NAIROBI, Aug 11 – Kenya expects its budget deficit to narrow to 5.7% of gross domestic product in the 2027/28 financial year, down from a projected 6.2% in 2026/27, as the government sets out its latest medium-term fiscal outlook.
The Finance Ministry said in its latest budget outlook paper that net domestic financing is expected to increase to 1.09 trillion Kenyan shillings, equivalent to about $8.4 billion, in 2027/28 from 1.04 trillion shillings in the current financial year.
Net external financing, meanwhile, is projected to decline to 235.9 billion shillings in 2027/28 from 247.2 billion shillings in 2026/27. The figures point to a continued reliance on domestic borrowing even as the government expects the overall fiscal gap to narrow.
The latest deficit projection represents a significant change from an earlier estimate. In July, when the Finance Ministry began public consultations for the 2027/28 budget, it had forecast the deficit at 3.6% of GDP.
Kenya’s fiscal deficit projections can change during the budget preparation process before the government settles on a final figure for presentation to Parliament. The latest outlook therefore provides an updated indication of the government’s expected financing requirements rather than a final budget position.
The government is also bringing forward the presentation of next year’s budget because of national elections scheduled for August. The finance minister traditionally presents the annual fiscal budget to Parliament in June, but the timing will be adjusted ahead of the election period.
The revised fiscal outlook comes as Kenya continues to manage pressure from elevated public debt and financing requirements. The balance between domestic borrowing, external financing and expenditure will remain central to the government’s efforts to contain fiscal risks while maintaining funding for public programmes.
The reduction in the projected deficit, if maintained through the final budget process, would indicate some progress towards fiscal consolidation. However, the increase in projected net domestic financing means that the government will continue to rely substantially on the local market to fund its fiscal requirements.
