Report shows Sh1 tr was borrowed in 2024-25 yet less than half went to development Kenya's huge borrowing is not benefiting taxpayers as more than half of the amount goes to financing recurrent debt, according to the Institute of Public Finance. The policy research and advocacy body says out of the more than Sh1 trillion borrowed in the last financial year, less than half of the amount went to development projects such as roads, hospitals, schools and other public investments.
According to the 2026 Annual National Shadow Budget (ANSB) by the Institute, the government’s net borrowing in 2024-25 financial year stood at Sh1.03 trillion, while development spending was only Sh582.9 billion. IPF CEO Daniel Ndirangu said that this implies roughly Sh451 billions of borrowed funds may have financed recurrent expenditure, including wages, administration and other day-to-day costs.
In a call to the state to restore fiscal discipline in 2026-27 budget, the think tank says treasury should refocus spending on high-impact priorities by adopting realistic revenue projections, enforcing hard spending ceilings and limiting use of supplementary budgets.
“In social protection, for example, we have multiple bursary schemes operating in parallel, leading to duplication, leakages, and inequitable access.” said Ndirangu. The Institute further urges increased domestic health financing with a clear post-donor transition plan, stronger and more coordinated social protection systems, institutionalised gender-responsive budgeting, and the mainstreaming of climate adaptation financing across sector budgets, alongside enhanced transparency and parliamentary oversight.
The shadow budget warns that Kenya’s fiscal position is becoming increasingly strained, with rigid obligations consuming most public resources before new investments are considered. Interest payments are projected at Sh1.2 trillion, while national government wages and salaries are estimated at Sh720.7 billion.
County transfers are projected at Sh495.5 billion. Combined, these three items alone account for Sh2.42 trillion, or more than half of total expenditure, sharply reducing room for development spending. The shadow budget argues that Kenya’s challenge is no longer a lack of policy ideas, but the inability to finance them credibly.