Treasury misses development spending limit for fourth year

This story has significance for readers across Kenya and beyond.

President William Ruto’s government has failed to meet the legal threshold for development spending for the fourth consecutive year, highlighting persistent underinvestment in projects that support long-term economic growth and infrastructure development.

Actual development expenditure accounted for 26.89 percent of ministerial national government spending in the year ended June 2026, falling below the statutory minimum of 30 percent.

The government spent Sh736.1 billion on development projects against total ministerial expenditure of Sh2.737 trillion, National Treasury data show. This left the government about Sh85.1 billion short of the amount required to meet the 30 percent threshold.

This is despite an increase in development spending, which rose by Sh150.2 billion, or 25.6 percent, from Sh585.9 billion in 2024/25.

However, total ministerial expenditure on expenses such as operation and maintenance, debt repayment and salaries expanded faster, rising by Sh385.7 billion, or 16.4 percent, during the same period.

The faster growth in national government expenditure meant that the additional resources directed toward development were insufficient to lift its share to the legally required level.

Section 15 of the Public Finance Management Act requires at least 30 percent of national and county government budgets to be allocated to development expenditure over the medium term, usually three to five years.

The latest figures show the government has remained below the threshold since 2021/22, when development spending accounted for 28.15 percent of actual ministerial expenditure.

The share subsequently fell to 25.28 percent in 2022/23, recovered marginally to 25.64 percent in 2023/24 and declined to 24.92 percent in 2024/25.

The latest performance represents an improvement, but still leaves the government in breach of a requirement intended to protect development spending from competing recurrent demands.

Treasury has previously attributed its failure to meet the threshold to “expenditure rationalisation measures undertaken during budget execution”, pointing to spending cuts and adjustments made as the year progresses.

The explanation highlights the tension between protecting capital projects and the government’s need to contain expenditure when revenues fall short or fiscal pressures intensify.

Treasury says it is nevertheless prioritising projects considered critical to economic transformation.

In the 2026 Budget Policy Statement (BPS), Treasury officials said development expenditure is allocated around flagship projects under Vision 2030 and the Bottom-Up Economic Transformation Agenda.

They said the capital budget prioritises completion of ongoing projects, particularly infrastructure projects with a high impact on “poverty reduction, equity and employment creation”.

Treasury also gives priority to counterpart funding for projects supported by development partners, where the government must provide part of the financing.

The focus is also on strategic policy interventions covering the entire country, regional integration, social equity and environmental conservation, the officials wrote in the BPS report.

Treasury data shows that despite these priorities, actual development spending continued to fall below the legal threshold.

During the year to June, the government also spent less on development than originally planned, with actual expenditure of Sh736.1 billion falling about Sh39.9 billion below the initial allocation of Sh776 billion.

The lower-than-budgeted spending points to continuing challenges in executing capital projects as the administration promotes major investments in roads, housing, energy and other infrastructure.

“There have been persistently low absorption rates of development expenditure in recent years, which has led to stalled progress on key projects despite overall budget increases,” the Parliamentary Budget Office, a unit which advises lawmakers on financial, budgetary and economic matters, wrote in its report on 2026 BPS.

Treasury’s own projections suggest the breach will continue into the current financial year.

“The National Government projects an allocation of 26.7 percent in the financial year 2026/27 and 29.5 percent for financial year 2027/28 and above 30 percent over the medium term,” the Treasury wrote in a budgetary outlook paper this month.

This means the government is budgeting for another year below the legal development-spending floor before expecting to achieve full compliance in subsequent years.

The continued failure to reach the threshold raises questions about whether sufficient resources are reaching projects capable of expanding productive capacity, creating jobs and supporting long-term economic growth.

The continued breach of the legal development spending threshold also highlights the difficulty of maintaining capital investment while the government faces pressure to contain recurrent spending, finance a large budget deficit and meet rising debt-service obligations.

Reporting originally appeared via Business Daily. Read the full source for additional context.