Auditor General Nancy Gathungu
has delivered a bold assessment on
the 2025-26 budget proposals, warning that mismanagement, unrealistic
revenue targets and chronic underperformance in development risk
plunging the country deeper into debt.
She said aspects characterising
President William Ruto’s administration’s second budget also risk
undermining critical public services.
In a 24-page presentation to Parliament’s Budget and Appropriations
Committee, Gathungu said a pattern
of fiscal indiscipline casts doubt on
the government’s ability to achieve
Ruto’s much-touted “economic transformation” agenda.
At the heart of Gathungu’s critique
before the Alego Usonga MP Sam
Atandi-led committee is the National Treasury’s over-optimistic revenue
strategy.
The proposed budget projects ordinary revenue at Sh2.76 trillion up
from Sh2.58 trillion in financial year
2024-25.
However, the amount falls short
of the World Bank’s recommended
15 per cent tax-to-GDP threshold.
The auditor general linked the gap
to weak enforcement, evasion and
poor forecasting.
Historical data shared by the auditor general reveals a five-year trend
of missed targets.
In the fiscal year 2023-24 alone,
revenue collections fell short by
Sh170 billion (6.9 per cent), while
tax arrears ballooned to Sh2.33 trillion by June 20 last year, translating
to a 133 per cent spike from 2023.
“The KRA’s targets are disconnected from reality,” Gathungu said,
noting that uncollected arrears for
2023-24 alone amounted to 91.8 per
cent of total Treasury revenue.
“When
projections are inflated, borrowing
becomes inevitable.”
The consequences are dire. With
public debt already at Sh11.1 trillion,
Gathungu warned that persistent revenue gaps could force Kenya to take
on costly loans to fund the Sh4.24
trillion budget, further straining taxpayers.
She urged the Treasury
to adopt “cautious, evidence-based
forecasts” and modernise tax systems
to curb evasion.
While the budget allocates Sh643.9
billion to development—25.8 per cent of national expenditure—Gathungu revealed that poor execution and
delayed funding have rendered such
allocations largely symbolic.
Audits show Kenya has consistently
failed to meet the legal requirement of
dedicating 30 per cent of budgets to
development, with absorption rates
worsening yearly.
In the year 2023-24, only Sh500.2
billion of Sh708.8 billion (29 per
cent) was spent, leaving projects
half-built and objectives unmet, while
some have pending bills.
Donor-funded initiatives fared no
better.
Fourteen projects worth Sh515
billion had Sh304 billion (59 per cent)
unused by mid last year, triggering a
penalty charge of Sh6.57 billion for
undrawn loans since 2020.
“Some of the projects have clauses
where they attract commitment fees
for any undrawn amounts leading to
wastage of funds and lack of value for
money,” the auditor said.
Among the
worst performers include the Mombasa Gate Bridge which had 98 per
cent undrawn funds. The project has
consumed Sh938 million.
