The Kenya Revenue Authority (KRA) recorded a KSh58.2bn shortfall in ordinary revenue in the first quarter of the 2026/27 financial year.
Ordinary revenue receipts, which include tax and non-tax revenues, totalled KSh655.8bn, up 14.4 per cent from KSh573.5bn in the same period last year, according to data from the National Treasury.
The National Treasury said that by the end of September 2026 revenue collection was below target by KSh40.4bn, mainly because of the KSh58.2bn ordinary revenue shortfall, while ministerial appropriations in aid surpassed their target by KSh17.8bn.
Treasury figures also show that overall revenue grew by 15.9 per cent by the end of September 2026 compared with a growth of 1.4 per cent at the end of September 2025, and ordinary revenues grew by 14.4 per cent versus a contraction of 2.9 per cent in the comparable period.
Income tax recorded the largest shortfall at KSh25.4bn, with receipts of KSh297.9bn against a target of KSh323.3bn, and excise duty receipts were off target by KSh16.3bn, while import duty was the only major tax to exceed its collection target.
The recorded revenue shortfalls are expected to widen the budget deficit, forcing the Treasury to borrow more to fund government spending.
Expenditure in the quarter surpassed its target by KSh116.9bn, driven by recurrent overspend of KSh59.3bn and development overspend of KSh34.7bn, and transfers of equitable share revenues to county governments were above target by KSh22.9bn.
The fiscal deficit including grants reached KSh329.1bn in the first three months, equal to 1.6 per cent of gross domestic product, surpassing the target of KSh174.8bn or 0.8 per cent of GDP.
The Treasury identified revenue erosion, debt and rising spending needs as fiscal pressures and said cost rationalisation and revenue base expansion remain the key reforms, noting that domestic revenue’s share of GDP has fallen from 18.1 per cent in 2013/14 to a projected 13.9 per cent in 2026/27.
“The strategy aims to progressively strengthen tax revenue mobilisation by simplifying and harmonising tax laws, rationalising and targeting tax expenditures and creating a simple, predictable and fair tax system,” the National Treasury said.
The Treasury also plans to scale up non-tax revenues by enhancing the capacity of ministries and state departments to generate income from public services and improve operational systems.
On the spending front, the Treasury expects some heavy capital-expenditure projects to be shifted to the National Infrastructure Fund, established in March 2026 and capitalised with KSh310.6bn from Kenya Pipeline Company and Safaricom Plc divestiture proceeds.
The reforms are projected to reduce the fiscal deficit from 6.8 per cent of GDP in 2025/26 to 5.5 per cent in the current fiscal year.
Capital Business reported that tax revenue in September rose 14.85 per cent to KSh258.31bn, stating “Tax revenue collected: KSh258.31 billion, up 14.85 per cent.”
The same update added “Public Debt Service: KSh109.66 billion,” and noted domestic borrowing of KSh101.72bn and external loans and grants of KSh54.05bn for the month.
Non-tax revenue for September stood at KSh13.95bn with other domestic financing of KSh364.39m, while recurrent spending was KSh140.25bn, development spending KSh60.22bn, and county governments received KSh40.66bn as equitable share.
The Treasury’s annual tax revenue target for FY 2026/27 is approximately KSh2.86 trillion, although some projections have been revised amid slower economic growth.
