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26 June, 2023

On 15 June 2023, the National Treasury presented Kenya’s FY’2023/2024 National Budget, to the National Assembly, highlighting that the total budget estimates for FY’2023/24 will increase by 8.7% to Kshs 3.7 tn from the Kshs 3.4 tn in FY’2022/2023 while the total revenue inclusive of grants will increase by 15.7% to Kshs 3.0 tn from the Kshs 2.6 tn in FY’2022/2023. The increase is mainly due to a 17.3% increase in ordinary revenue to Kshs 2.6 tn for FY’2023/2024 from the Kshs 2.2 tn in FY’2022/23. Over the years, the Kenyan Government budget has been on the rise on the back of ever-increasing recurrent expenditure. The chart below shows the evolution of the government budget over an eleven-year period:


Source: National Treasury of Kenya

Recurrent expenditure is set to increase by 4.4% to Kshs 1.6 tn in FY’2023/2024, from Kshs 1.5 tn in the FY’2022/2023 budget estimates, while Consolidated Funds Services (CFS) expenditure is expected to increase by 13.6% to Kshs 986.2 bn, from Kshs 867.8 bn in the FY’2022/2023 budget estimates. Also, Development expenditure is set to increase by 20.3% to Kshs 743.5 bn from Kshs 618.2 bn in the FY’2022/2023 budget estimates. The table below summarizes the key buckets and the projected changes:

Cytonn Report: Comparison between FY’2022/2023 and FY’2023/2024 Budgets estimates


FY'2022/23 Supplementary Budget I

FY'2023/24 Estimates

Change y/y (%)

Ordinary Revenue




Total Appropriation-in-Aid




Total grants




Total Revenue & Grants




Recurrent expenditure




Recurrent Consolidated Funds Services (CFS)




Development expenditure




County Transfer & Contingencies




Total expenditure




Fiscal deficit inclusive of grants




Projected Deficit as % of GDP



(1.4%) points

Net foreign borrowing




Net domestic borrowing




Total borrowing




Source: Financial Statement For the FY 2023/2024-BudgetThe Mwananchi Guide for the FY’2023/24 National Treasury of Kenya

Development expenditure has continued to lag behind, contributing only 20.2% of the FY’2023/24 expenditure estimates. Allocation to infrastructure remains the highest taking 63.0% of the development expenditure. In the FY’2023/2024, infrastructure expenditure is set to increase by 12.4% to Kshs 468.2 bn, from Kshs 416.4 bn in FY’2022/2023 in line with the government’s agenda of increasing the development of critical infrastructure in the road, rail, energy, and water sectors in order to open many areas to economic activities and spur growth in other sectors of the economy.

The total borrowing for the FY’2023/24 is set to reduce by 12.9% to Kshs 718.0 bn, from Kshs 824.0 bn, in FY’2022/23 budget estimates. The public debt mix is projected to comprise 18.3% foreign debt and 81.7% domestic debt, from 48.0% foreign financing and 52.0% domestic financing as per the FY’2022/23 budget. The debt servicing costs are set to rise by 19.4% to Kshs 1.6 tn in FY’2023/24, from Kshs 1.4 n in the FY’2022/23 budget. The rise in debt servicing expenses can be partly attributable to the depreciation of the Kenyan shilling, given that a larger proportion of external debt is denominated in US dollars.

The Kenyan economy has remained resilient despite recording a slowdown in growth to 4.8% in 2022 compared to a growth of 7.6% recorded in 2021. The slowdown was partly attributable to the uneven weather patterns experienced in 2022, which impacted agricultural production, given agriculture is the main contributor to the GDP. However, the economy is expected to rebound in 2023 and expand by 5.5%, mainly supported by private sector growth, continued strong growth of the financial services sector, and recoveries in the agricultural sector. Furthermore, in the FY’2023/2024 budget, the government has allocated Kshs 4.5 bn for the fertilizer subsidy program aimed at lowering the cost of farm input and enhancing the food supply in the country.

Notably, the government has reduced its appetite for foreign debt, projecting to borrow Kshs 131.5 bn in foreign debt in the FY’2023/24, a 66.8% decrease from 395.8 billion in the FY’2022/23. The move is expected to lower the cost of debt servicing, given that foreign debt has been ballooning as a result of the Kenya shilling's sustained depreciation against major currencies. However, the government's shift in borrowing more domestically, by projecting to increase its domestic borrowing by 37.0% to Kshs 586.5 bn in FY’2023/24, from Kshs 428.3 bn in FY’2022/23, is expected to have an impact on credit to the private sector. This is mainly because banks view lending to the government as more secure than lending to the private sector in order to minimize losses given the elevated credit risk.

Overall, we are of the view that the main driver of the growing public debt is the fiscal deficit occasioned by lower revenues as compared to expenditures. As a result, implementing robust fiscal consolidation would help the government bridge the deficit gap. This can be achieved by minimizing spending by implementing structural reforms and reducing amounts extended to recurrent expenditure. Fiscal consolidation would also allow the government to refinance other critical sectors, such as agriculture, resulting in increased revenue. However, the overall risk to the economy remains high, owing to the high debt servicing costs in the next fiscal year, given the maturing USD 2.0 bn Eurobond due in June 2024. 

For more information, please see our report on Kenya’s FY’2023/24 budget Review.