A week after the presentation of the 2025-26 Budget, Kenyans continue to engage passionately on its implications. That is not only commendable—it is healthy.
It demonstrates the strength of our democracy and reflects the civic responsibility of a society committed to shaping its future. But with that responsibility also comes the need to engage honestly, candidly, and with facts.
This budget is a plan of action to consolidate Kenya’s ongoing economic recovery, stimulate new growth, and deepen exclusivity.
The theme, “Stimulating Sustainable Economic Recovery for Improved Livelihoods, Job Creation and Business and Industrial Prosperity,” aligns fully with the Government’s Bottom-Up Economic Transformation Agenda (Beta).
It is focused on restoring growth, creating jobs, lowering the cost of living, and securing long-term economic resilience.
Yet, Kenyans have asked a fair question: If the economy is recovering, why isn’t it being felt in our pockets—yet? The answer requires us to distinguish between short-term perception and long-term reality. Economic recovery, by its nature, is not instant.
It is gradual, deliberate, and structured—precisely because quick-fix booms often lead to painful collapses. What matters most is that the fundamentals are now firmly turning in the right direction, laying a solid foundation for sustained and inclusive prosperity.
And the numbers speak clearly. Kenya’s economy grew by an average of 5.2 percent across 2023 and 2024—higher than the global average (3.3 percent) and the Sub-Saharan Africa average (3.8 percent).
Even with the shocks of 2024—floods, global tensions, and domestic unrest—Kenya still recorded growth of 4.7 percent. We project this will rise to 5.3 percent in 2025, with agriculture, services, and industry as the main drivers.
But beyond growth rates, Kenyans want to know whether the cost of living is easing—and the facts here are equally clear.
Inflation, which stood at 9.6 percent in 2022, has declined sharply to 3.8 percent by May 2025. Why does this matter? Because inflation is the silent tax on every household. High inflation erodes purchasing power, makes budgeting difficult, and hurts the poor the most.
A lower inflation rate may not create headlines—but it brings the quiet stability that protects family incomes, stabilises food prices, lowers transport costs, and allows businesses to plan with confidence.
Indeed, household consumption—the single largest component to Kenya’s GDP—has expanded by 5.6 percent over the past year, providing further evidence that purchasing power is gradually improving in tandem with macroeconomic stability. Incomes are holding steady, and consumption is growing—not because of borrowing or speculation, but because the economy is slowly regaining strength.
A key contributor to this positive trend has been the strengthening of the Kenya Shilling. From Sh159.7 per dollar in January to Sh129.3 by May, the appreciation of the currency reflects disciplined monetary and fiscal policy—not luck.
A stronger shilling reduces the cost of imports—fuel, fertilizers, industrial inputs, and medicines—lowering input costs for producers and ultimately benefiting consumers through more stable prices.
Monetary policy has also played its role. The Central Bank of Kenya has eased its policy stance, cutting the policy rate to 9.75 percent, while Treasury bill rates have dropped from 15.9 percent to 8.3 percent.
Commercial bank lending rates have started falling from 17.2 percent to 15.7 percent, making credit cheaper for farmers, SMEs, and home buyers. This is how real growth happens—not through slogans, but through cheaper financing that fuels private sector activity.
At the same time, Kenya’s foreign exchange reserves now stand at $10.5 billion—covering nearly five months of imports. This is our insurance against external shocks and helps stabilise the shilling further. These buffers did not emerge by accident—they are the outcome of increased exports, tourism receipts and remittances.
Speaking of taxes, let me emphasize: the Government has listened. We made a clear commitment: no new taxes in 2025. And we have kept that promise. Instead, we are focusing on improving tax administration by sealing leakages, expanding the tax base, and simplifying compliance. Digitisation is at the heart of this reform.
For instance, the e-Government procurement (e-GP) system will ensure that all government tenders pass through automated audit trails, significantly reducing opportunities for corruption and leakages. This is how we protect taxpayer resources and restore trust in public financial management.
Our fiscal path is equally responsible. The fiscal deficit is narrowing from 5.7 percent of GDP to 4.8 percent, with a clear trajectory to 2.7 percent by 2028. Public debt, in present value terms, is set to fall steadily toward our target of 55 percent of GDP, plus or minus 5 percent.
This is not theory—it is a disciplined restructuring effort to secure inter-generational equity and prevent debt burdens from overwhelming future generations.
Still, we remain realistic about risks. Global markets remain volatile. Climate change continues to challenge agriculture and livelihoods.
But unlike in the past, we now have buffers—strong reserves, a stable currency, credible fiscal reforms, and improving investor confidence—to navigate those risks with stability.
Perhaps most important of all, we are linking this macroeconomic stability to the real economy. Through Beta, over 6.5 million registered-farmers have now benefited from the fertiliser subsidy programme, improving yields and lowering food costs.
Over 1.2 million youth have accessed skills and employment opportunities supported by Beta initiatives. And already, new regulatory reforms have reduced the average time for business approvals from 90 days to under 30, unlocking private sector dynamism across sectors.
Economic recovery is real—not just because we say so, but because the data shows it. And while it may not yet be felt everywhere with equal intensity, we are determined to stay the course. We are rejecting populist shortcuts and embracing steady, disciplined, evidence-based reforms. That is how real prosperity is built.
Government alone cannot do it. The private sector is our indispensable partner, and that is why the Public-Private Dialogue Platform remains open and active for all constructive contributions.
The truth is simple: we may not yet be where we want to be, but we are firmly headed in the right direction. Stability is back. Inflation is down. The currency is stronger. Interest rates are easing. Reserves are up. Revenue reforms are ongoing. And the real economy is responding.
Kenya’s economic recovery is not an accident—it is by design. And with unity of purpose, we will secure a future of shared prosperity for all.
Dr Chris Kiptoo is the Treasury Principal Secretary.
