Official Launch of the Financial Year 2026/27 and the Medium-Term Budget Preparation Process

Executive Summary

The National Treasury officially launched the Financial Year (FY) 2026/27 and the Medium-Term Budget Preparation Process on August 25, 2025, at the Kenyatta International Convention Centre (KICC). This marks the start of the budget cycle and aligns Kenya’s fiscal planning with its Bottom-Up Economic Transformation Agenda (BETA) and Medium-Term Plan IV (MTP IV). The process promotes transparency, accountability and public participation, ensuring resource allocation supports economic growth and social development. This report examines the significance of the launch, its alignment with economic priorities and its contribution to Kenya’s fiscal and development agenda.

Introduction

The launch of the FY 2026/27 budget preparation process is a crucial milestone in Kenya’s Public Finance Management Framework. It is anchored in Article 201 and 220 of the Constitution and Sections 35 and 36 of the Public Finance Management Act (Cap 412A), which mandate transparency and inclusivity in public finance management. The event sets the stage for structured budget-making through Sector Working Groups (SWGs), ensuring collaboration between government entities and stakeholders while upholding principles of accountability, equity and efficiency.

Importance of the Launch

1. Kick-starts the Budget Cycle – The launch marks the official start of the budget preparation calendar, guiding Ministries, Departments and Agencies (MDAs) on timelines for preparing and submitting their budget proposals.
2. Aligns Policy and Resource Planning – It ensures that fiscal priorities align with Vision 2030, MTP IV and the BETA agenda, focusing on agriculture, housing, MSMEs, universal healthcare and digital economy.
3. Promotes Transparency and Public Participation – The event provides a platform for stakeholder engagement, including county governments, private sector, civil society and citizens, strengthening accountability and inclusivity.
4. Supports Evidence-Based Resource Allocation – MDAs receive guidance on budget ceilings, revenue projections and sector priorities, facilitating rationalized and efficient allocation of resources.
5. Anchored in Legal Framework – The launch complies with constitutional provisions and the PFMA, reinforcing fiscal discipline and governance.

How It Supports the Government’s Economic Agenda

The FY 2026/27 and medium-term plans are designed to:

– Anchor Budget to Strategic Priorities – Expenditure is directed toward BETA’s five pillars:

• Agricultural transformation
• Affordable housing
• MSME development
• Universal health coverage
• Digital infrastructure and creative economy

– Enhance Fiscal Responsibility – Through measures such as zero-based budgeting to eliminate duplication and inefficiencies, maintaining deficits within safe limits, and ensuring debt sustainability.

– Mobilize Resources for Development – The framework focuses on infrastructure investment, social programs, and debt management, securing financing for national development goals.

– Promote Macroeconomic Stability – By setting clear revenue targets and expenditure ceilings, the process ensures predictability and stability, boosting investor confidence and economic resilience.

– Foster Inclusivity and Devolution – Public participation and county engagement ensure that budget priorities reflect regional needs, promoting equitable growth.

Economic Context and Outlook

The budget preparation process takes place amid global economic uncertainties, including rising trade barriers, policy shifts, and financial tightening. Despite these challenges, Kenya’s economy demonstrates resilience, with a 5.3% GDP growth in 2025, largely driven by agriculture. The government aims to sustain this momentum by targeting:

• Revenue collection at 17.2% of GDP
• Expenditure below 22.2% of GDP
• Inflation within ±2.5% of the target range

These measures aim to maintain macroeconomic stability while creating an enabling environment for investment and inclusive growth.

Recommendations

1. Strengthen Revenue Mobilization – Enhance tax compliance, broaden the tax base, and leverage digital systems for efficient revenue collection.
2. Deepen Public Participation – Expand citizen engagement through digital platforms and grassroots consultations to improve inclusivity.
3. Focus on High-Impact Sectors – Prioritize investments in agriculture, housing, healthcare, and digital infrastructure to accelerate job creation.
4. Enhance Fiscal Discipline – Implement zero-based budgeting rigorously and monitor spending efficiency across MDAs.
5. Build Economic Resilience – Develop strategies to cushion the economy against external shocks such as commodity price fluctuations and global financial volatility.

Conclusion

The official launch of the FY 2026/27 and Medium-Term Budget Preparation Process at KICC marks a strategic step toward sound fiscal management and sustainable development. By aligning resources with Kenya’s economic transformation agenda, ensuring transparency, and embracing inclusive planning, the government reinforces its commitment to economic stability, job creation, and improved public service delivery.