NAIROBI,Kenya Feb 17 – A fresh contest over the sharing of national revenue between the two levels of government has begun after the National Treasury tabled the 2026/2027 Budget Policy Statement (BPS) before the Senate.
In the document, the Treasury proposes to allocate Sh420 billion to county governments, drawing the figure from audited revenues of Shs 1.9 trillion for the 2021/2022 financial year.
The proposal was presented to the Senate Standing Committee on Finance and Budget, setting the stage for what is expected to be an intense debate over the future of devolution financing.
The recommendation comes against the backdrop of a projected national budget of Shs 4.18 trillion. While the Treasury maintains that the allocation is designed to safeguard essential services and maintain fiscal stability, the proposal has already triggered pushback from key stakeholders.
The Council of Governors has raised concerns that the proposed KShs 420 billion is insufficient to meet counties’ expanding obligations, particularly in healthcare, agriculture, infrastructure and other devolved functions.
The governors’ position is reinforced by the Commission on Revenue Allocation, which recommended a higher equitable share of KShs 458.94 billion.
The contention is Treasury’s drive toward fiscal consolidation targeting a budget deficit of 4.6 per cent of GDP versus counties’ insistence that allocations must reflect the real cost of service delivery under the Constitution.
The 2026 BPS also signals a strategic alignment of public spending with the government’s Bottom-Up Economic Transformation Agenda (BETA), which prioritizes investment in key productive sectors. However, senators have raised questions about the sustainability of the broader fiscal framework underpinning the policy.
While reviewing the BPS at Parliament Buildings, members of the Senate Finance Committee, chaired by Mandera Senator Ali Roba, expressed concern over the government’s shift from a fixed public debt ceiling to a debt-to-GDP ratio framework.
Although the Treasury argues that the move aligns Kenya with international best practice, senators warned that the transition could mask deeper fiscal pressures. They cautioned that heavy domestic borrowing to finance the deficit risks crowding out private sector credit and undermining economic growth.
“The legislative manoeuvring risks stifling domestic growth by absorbing available credit,” Senator Roba said.
“By shifting to the debt-to-GDP ratio, the government risks crowding out local borrowing for the private sector, despite its stated intention to strengthen private investment. We will base our recommendations on the realities currently facing the country.”
