The National Treasury recorded a wider Sh90.1 billion revenue miss in the fiscal year ended June 30, 2026, despite undertaking major cuts to its resources target for the period.
Fresh data from the exchequer shows total revenue reached Sh3.168 trillion for the fiscal year, falling shy of the Sh3.2590 trillion target for both ordinary revenue and ministerial appropriations.
Ordinary revenue or taxes recorded the widest shortfall at Sh53.5 billion. Ordinary revenue collections totaled Sh2.587 trillion, which was below the target of Sh2.64 trillion.
Appropriations in aid, which represent collections by ministries, State departments and agencies, were off the mark by Sh36.6 billion at Sh581.7 billion against a Sh618.3 billion target.
In contrast, the prior revenue underperformance was Sh62 billion as taxes missed the mark by Sh76 billion but appropriations over performed by Sh14 billion in the fiscal year to June 2025.
The revenue underperformance for the period to June 2026 underlines difficulties in domestic revenue mobilization, which includes the setting of overambitious targets.
The underperformance in domestic revenues usually resulted in a wider fiscal deficit, which was funded mainly through borrowing from local credit markets.
“Total revenues amounted to Sh3.168 trillion, resulting in an underperformance of Sh90.1 billion mainly on account of shortfall registered in ordinary revenue of Sh53.5 billion,” the National Treasury said.
“Ministerial appropriation in aid collection at Sh581.7 billion was below target by Sh36.6 billion.”
Most tax revenue receipts, including import duty, pay as you earn (Paye) and value added tax (VAT), met the revised target, with excise duty being the only outlier, having recorded a Sh1.5 billion shortfall.
The bulk of the underperformance in ordinary revenues was recorded under non-tax resources, which cover penalties and levies applied and collected by the Kenya Revenue Authority (KRA).
Receipts from non-tax revenues were posted at Sh125.3 billion against a target of Sh183.2 billion.
The underperformance in domestic revenue mobilisation from taxes and appropriations in aid resulted in increased local borrowing to plug a wider deficit, which was recorded at 7.1 percent of GDP.
“From the financing side, total financing for the fiscal year 2025/26 amounted to Sh1.34 trillion or 7.1 percent of GDP. The deficit was financed by net domestic financing of Sh1.135 trillion or six percent of GDP and net foreign financing of Sh205.5 billion.
Net domestic borrowing overshot the target by Sh161.7 billion.
Ordinary revenue is projected at Sh2.985 trillion for the financial year that commenced on July 1, 2026.
Total revenue for the period is estimated at Sh3.629 trillion, including Sh644 billion in ministerial appropriations-in-aid (A-i-A).
Despite the higher revenue target for the new cycle, domestic resource mobilisation will be impacted by new macroeconomic shocks, including the emergence of the US-Israel war on Iran, which has sent local pump prices higher.
The government has offered concessions to help contain consumer pain, including halving VAT on petroleum products to eight percent from 16 percent over the next six months, resulting in an estimated revenue hole of Sh32 billion.
The National Treasury has further mulled a revision of Paye bands in September 2026, to help increase consumer disposable incomes/spending.
The exchequer has trimmed its economic growth forecast for 2026 from an initial 5.3 percent to five percent.
