Kenya's fiscal deficit is projected to increase by 10.23 percent to Sh1.017 trillion (4.9 percent of GDP) in the 2026/27 financial year, according to the National Treasury's 2025 Budget Review and Outlook Paper (BROP). This expansion signals renewed borrowing pressures despite ongoing fiscal consolidation efforts.

• The National Treasury plans to finance this deficit primarily through domestic borrowing, with Sh775.8 billion sourced locally and Sh241.8 billion from external financing.
• Total expenditure for 2026/27 FY is projected at Sh4.65 trillion, against revenues of Sh3.58 trillion, creating a significant financing gap.
• Increased reliance on domestic financing could intensify competition for credit with the private sector, potentially driving up interest rates.