Kenya’s economy set to grow 5.3% in 2026 as budget prioritises development

Kenya’s economy is projected to strengthen further in 2026 as the government increases spending on development while intensifying efforts to improve revenue collection and fiscal discipline.

Key highlights from the Budget and Appropriations Committee indicate that the economy is expected to grow to 5.3 percent in 2026, up from 4.7 percent in 2024, signalling continued recovery driven by improved macroeconomic stability and better performance in key sectors.

The committee noted that growth is being supported by stronger output in agriculture as well as recovery in sectors such as construction, tourism, transport and financial services.

Government revenue mobilisation is also expected to improve significantly in the next financial year.

Total revenue for the 2026-27 financial year is projected to reach Sh3.588 trillion, equivalent to 17.1 percent of Gross Domestic Product (GDP).

According to the committee, the projected growth in revenue reflects ongoing reforms in tax administration, increased compliance and the digitisation of revenue collection systems.

“These reforms are aimed at strengthening Kenya’s fiscal independence while gradually reducing the country’s reliance on borrowing,” the committee noted.

At the same time, the government plans to increase public expenditure to Sh4.74 trillion in the 2026-27 financial year, representing an increase of more than Sh435 billion compared to the previous fiscal year.

The additional spending will mainly target sectors considered critical to economic productivity and citizens’ welfare, including education, healthcare, infrastructure, agriculture and national security.

The committee emphasised that sustained investment in these areas is expected to improve service delivery while stimulating economic activity across the country.

Affordable housing remains a central pillar of the government’s economic transformation agenda.

Beyond addressing the country’s housing shortage, the programme is also helping stimulate economic growth by boosting activity in the construction sector and creating jobs across multiple supply chains.

“Affordable housing continues to support employment creation while contributing to urban development and addressing the country’s housing deficit,” the committee said.

The government is also implementing 47 County Aggregation and Industrial Parks (CAIPs) aimed at strengthening manufacturing and promoting value addition at the county level.

The industrial parks are expected to support agro-processing, reduce post-harvest losses and create employment opportunities closer to rural production areas.

Infrastructure development will remain a major focus of public investment as the government seeks to reduce the cost of doing business and improve Kenya’s competitiveness as a regional economic hub.

Ongoing investments in roads, electricity generation, irrigation and logistics systems are expected to unlock productivity and enhance connectivity across the country.

In the energy sector, Kenya plans to expand electricity generation capacity by 10,000 megawatts, drawing from renewable sources such as geothermal, solar, wind and hydropower.

The expansion is intended to support industrial growth while improving reliability of power supply.

The committee also noted that inflation has remained largely stable, staying within the Central Bank’s target range of around five percent.

Stable inflation helps protect household purchasing power and provides a more predictable environment for businesses and investors.

Support for small businesses also remains a key component of the government’s economic strategy.

Financing programmes targeting Micro, Small and Medium Enterprises (MSMEs), including the Hustler Fund, Youth Enterprise Fund, Women Enterprise Fund and NYOTA programme, are expected to continue expanding access to credit for entrepreneurs who often face challenges obtaining financing from formal financial institutions.

“These initiatives aim to unlock opportunities for grassroots entrepreneurship and strengthen economic participation across the country,” the committee said.

County governments are projected to receive Sh420 billion as equitable share allocation to support delivery of devolved services and local economic development programmes.

The committee stressed that maintaining fiscal discipline remains central to Kenya’s long-term economic stability.

The government is targeting a reduction of the fiscal deficit to 5.3 percent of GDP, a move aimed at stabilising public debt while maintaining development spending.

According to the committee, balancing economic growth with responsible financial management will be critical in ensuring sustainable long-term development.