Cabinet approves Sh4.2 trillion budget, Sh199 billion mini-budget
President William Ruto chairs the Cabinet on February 11, 2025 at State House, Nairobi.
The Cabinet is banking on expenditure cuts, increased revenue collection, and enhanced tax compliance to finance President William Ruto’s third budget amounting to Sh4.2 trillion for the 2025/26 financial year.
A Special Cabinet meeting chaired by Dr Ruto at State House, Nairobi, on Tuesday February 11, also approved the Supplementary Estimates No II of 2024/25 that authorises an additional expenditure of Sh344.8 billion out of which Sh199 billion has been allocated for recurrent spending and Sh145.8 billion for development.
The Cabinet said the approved 2025 Budget Policy Statement (BPS), which will now be forwarded to Parliament, sets Sh4.2 trillion budget for the 2025/26 financial year.
A dispatch from the Cabinet said the 2025/26 budget will be achieved through expenditure rationalisation, revenue mobilisation, and enhanced tax compliance.
The Cabinet noted that the government’s fiscal policy for 2025/26 prioritises fiscal consolidation to reduce debt vulnerability while ensuring adequate funding for essential public services.
“The Medium-Term Revenue Strategy will guide tax reforms, ensuring efficiency, fairness, and progressivity while balancing revenue generation with social protection,” a Cabinet dispatch states.
“Key measures include expanding the tax base, leveraging technology for tax efficiency, sealing revenue loopholes, and maximising non-tax revenues from ministries, departments, and agencies.”
The Cabinet said Sh3.09 trillion will go towards recurrent spending, Sh725.1 billion for development, Sh436.7 billion to county governments, and Sh5 billion for the Contingency Fund.
The Division of Revenue Bill 2025, proposes Sh2.8 trillion as the national government revenue, Sh405.1 billion as the county governments equitable share and Sh10.6 billion for the Equalisation Fund.
The Cabinet said the County Allocation of Revenue Bill 2025 will distribute the county share based on the Third Basis Formula, while the County Governments Additional Allocation Bill 2025 proposes an extra Sh69.8 billion - Sh12.89 billion from the National Government and Sh56.91 billion from development partners.
“With these additional funds, the total county transfers for 2025/26 will amount to Sh474.87 billion,” the Cabinet said.
On the Supplementary Budget II for 2024/25 of Sh344.8 billion, the Cabinet said the money will be spent on government and externally financed projects, personnel emoluments, budget realignments, and revenue adjustments.
The second mini-budget follows economic disruptions, including public protests in June, July, and August 2024, which led to the withdrawal of the Finance Bill 2024.
The Bill initially proposed to raise Sh344.3 billion in additional revenues but faced strong public protests led by the Generation Zoomer (Gen-Z).
Zero-based budgeting
To raise the required funding to meet the Sh4.2 trillion budget, the Cabinet said the public finance management will be strengthened through zero-based budgeting, a transition to accrual-based accounting, and the adoption of the Treasury Single Account to improve cash flow management.
The government will also fully operationalise Integrated Financial Management Information System (IFMIS) asset inventory management modules and scale up public-private partnerships (PPPs) to enhance private sector involvement in public service delivery.
“Growth is projected to remain stable at 5.3 percent in 2025 and 2026, supported by increased agricultural productivity, a resilient services sector, and strategic government interventions,” the memo said.
“To maintain economic momentum, the government has outlined six key priorities: reducing the cost of living, eradicating hunger, creating jobs, expanding the tax base, improving foreign exchange balances, and fostering inclusive growth.”
The Cabinet said the economic growth will be achieved through strategic investments in key economic sectors, strengthening production and market access, and attracting local and foreign investments.
The Cabinet also approved a comprehensive plan to enhance passenger experience at Jomo Kenyatta International Airport (JKIA) by streamlining operations and strengthening security.
“Key changes include exempting all African citizens from Electronic Travel Authorisation (ETA) requirements and easing intra-African travel,” the dispatch reads.
“Kenyan citizens will benefit from an increased duty-free threshold of goods brought into the country, which has now been increased from Sh50,000 to Sh250,000.”
The Cabinet said the government will enhance security screening at JKIA through risk-based profiling, ensuring only flagged bags undergo manual inspection in a dedicated screening room, reducing delays and improving efficiency.
The government plans to increase the number of immigration booths and staff will be doubled and introduce E-Gates to eliminate long queues and speed up clearance.
“Accountability measures will also be strengthened with new monitoring technology deployed to oversee airport staff, and mandatory uniforms with visible name tags required for all agency employees and retail concessionaires,” the Cabinet said.
“JKIA infrastructure will also undergo major upgrades, including modernised baggage handling systems, improved stormwater drainage and access roads, installation of covered walkways, enhanced air conditioning, and clearer signage.”
The Cabinet said meet-and-greet services will be strictly regulated to ensure only licensed facilitators operate within the airport to enhance security and order.
The Cabinet directed that the measures take immediate effect to reinforce JKIA’s position as a leading aviation hub by improving efficiency, security, and overall passenger experience.
The Cabinet also approved several host country agreements, including agreements with the International Institute for Democracy and Electoral Assistance, Save the Children International, Shelter Afrique Development Bank, Oxfam International, Norwegian Refugee Council, and Population Services International, among others.
The Cabinet further endorsed the ratification of an agreement with Singapore to eliminate double taxation and prevent fiscal evasion, and approved Kenya’s hosting of the International Air Transport Association (IATA).