Zero-Based Budgeting Takes Over Kenya's KSh 4.8 Trillion Spending Plan

National Treasury CS John Mbadi has signalled a major change in how Kenya prepares its national budget. The 2026/27 financial year plan adopts zero-based budgeting, forcing every ministry, department and agency to defend its proposed spending from a clean slate rather than building on previous allocations.

The approach anchors a Sh4.82 trillion spending framework. Mbadi presented the details in Parliament on Thursday, June 11, alongside pledges to avoid new taxes and instead broaden the revenue base.

Officials project revenue of around Sh3.6 trillion. A Sh1.2 trillion deficit will be covered largely by borrowing, with Sh995 billion expected from domestic sources and Sh116.1 billion from external loans. The heavy domestic tilt reflects efforts to limit exposure to foreign debt.

Zero-based budgeting entered the process during preparation of the Budget Policy Statement. It requires all spending proposals to compete annually for justification, aiming to root out legacy inefficiencies and tighten fiscal discipline.

Budget and Appropriations Committee chair Samuel Atandi emphasised that MDAs must now prepare budgets from a zero base. This marks the first full year of implementation, though Treasury officials acknowledge a full rollout could take up to three years as institutions adjust.

The Finance Bill 2026 is expected to generate an additional Sh120 billion through measures that expand the tax base rather than introduce fresh levies. These include enhancements to systems such as the Electronic Rental Income Tax System.

Professional bodies like the Institute of Certified Public Accountants of Kenya have welcomed the potential for better compliance but cautioned against penalties that could push small businesses deeper into informality. The Kenya Revenue Authority continues to face its own funding gaps that threaten collection targets.

For the construction and infrastructure sector, the new budgeting discipline carries direct implications. Projects will face stricter scrutiny at every cycle, potentially delaying approvals but also reducing wasteful allocations that have plagued past budgets.

Contractors and engineers often complain about delayed payments and stalled projects under incremental budgeting. Zero-based principles could force more realistic prioritisation of roads, energy grids, water systems and housing initiatives, provided implementation stays rigorous.

Analysts note that success hinges on strong oversight, adequate resourcing for tax administration and balanced enforcement. Treasury maintains the reforms will help sustain development spending while stabilising debt over the medium term.

The shift arrives amid ongoing pressure on public finances. How effectively ministries justify their infrastructure bids in the coming months will test whether this new approach delivers better value for Kenya’s built environment.