President William Ruto’s 2026/27 budget has put the government’s Bottom-Up Economic Transformation Agenda (BETA) under scrutiny as it seeks to balance ambitious development plans with the need to manage the country’s growing debt burden.
The budget estimates total expenditure at Sh4.82 trillion against projected revenue and grants of Sh3.67 trillion, resulting in a fiscal deficit of Sh1.146 trillion, equivalent to 5.5 per cent of the country’s Gross Domestic Product (GDP). To finance the shortfall, the government plans to rely largely on borrowing, with domestic loans expected to account for the biggest share.
Treasury projections show that Sh1.03 trillion of the deficit will be financed through the domestic market, while net external borrowing will contribute Sh116.2 billion. This means the bulk of the financing will come from local sources as the government seeks to limit exposure to foreign debt and exchange rate fluctuations.
The financing approach comes after years of pressure from debt repayments, including costly Eurobond obligations, and amid global economic uncertainties linked to tensions in the Middle East.
However, economists have raised concerns that increased domestic borrowing could limit access to credit for businesses and investors, potentially affecting private sector growth.
The budget is closely tied to the administration’s BETA programme, which aims to stimulate economic growth from the grassroots and improve livelihoods through targeted investments.
To support the agenda, the government has allocated Sh386.1 billion to its five key pillars: agriculture, affordable housing, healthcare, micro, small and medium enterprises (MSMEs), and the digital economy.
Agriculture remains a priority sector, with funding directed towards fertiliser subsidies, food security initiatives, land settlement programmes and value chain development to improve productivity and increase farmers’ earnings.
The government has also continued to support MSMEs through initiatives such as SAFER and NYOTA, which are designed to expand access to affordable financing and create employment opportunities, particularly for young people.
Affordable housing, one of the flagship programmes under BETA, has been allocated Sh50.6 billion for housing construction and an additional Sh20.9 billion for social housing projects.
Despite concerns over borrowing, the National Treasury maintains that the deficit remains sustainable and forms part of a broader fiscal consolidation plan. The government projects the budget deficit will gradually reduce from 5.5 per cent of GDP in the 2026/27 financial year to 3.3 per cent by 2028/29 through improved revenue collection and tighter expenditure controls.
