What government spending means
Government spending is all the money the government uses to run the country. It pays teachers, nurses and police officers. It builds roads, runs hospitals, funds universities and sends money to the 47 counties. It also repays the loans the country has taken.
Think of it like a household budget, only much bigger. Money comes in, money goes out, and when more goes out than comes in, the family borrows. The government does exactly the same thing, and the difference is that the money it spends is ours.
Most people only hear about government spending when the budget is read in June or when a scandal breaks. Yet it affects the price of fuel, the taxes on your payslip, whether your county hospital has medicine, and whether a supplier who delivered goods gets paid.
Where the money comes from
The government gets its money from 3 main places.
- Taxes. This is the biggest source. PAYE on salaries, VAT on what you buy, excise duty on fuel, airtime and drinks, corporate tax on businesses and import duty at the ports. KRA collects most of it.
- Other income. Fees for passports, licences, land searches and other services, plus profits and dividends from state companies.
- Borrowing. When taxes are not enough, the government borrows from banks, pension funds and ordinary Kenyans through Treasury bills and bonds, and from outside lenders like the World Bank.
For the 2026/27 financial year, which started on 1 July 2026, the government plans to spend more than it collects. The gap, called the deficit, is about Sh1.146 trillion. Around Sh1.03 trillion of that will be borrowed locally and Sh116.2 billion from abroad.
When the government borrows that much locally, banks prefer lending to it over lending to small businesses, because the government is the safer customer. That is one reason loans stay expensive for ordinary people.
Where the money goes
Kenya’s budget for 2026/27 is Sh4.82 trillion, the biggest in the country’s history. It is split into 2 kinds of spending.
Recurrent spending is the money that keeps the government running every month: salaries, pensions, fuel, rent, stationery and interest on loans. Development spending is the money that builds things that last, like roads, dams, hospitals, schools and houses.
| Item | Amount (Sh) | What it covers |
|---|---|---|
| Recurrent spending | 3.57 trillion | Salaries, operations, pensions and interest on debt |
| Interest on debt | 1.205 trillion | Part of recurrent spending, paid on local and foreign loans |
| Education | 784 billion+ | Includes 424 billion for the Teachers Service Commission |
| Development spending | 750 billion | Roads, dams, housing, hospitals and other projects |
| Security | 567 billion | Includes 252 billion for the Ministry of Defence |
| Counties | 428 billion | Equitable share sent to the 47 counties, plus 74 billion in conditional grants |
The figures overlap, because education and security include both recurrent and development money. Figures are from Pulse Kenya and The Exchange.
The number to notice is interest. For every Sh100 the government plans to spend this year, about Sh25 goes to interest on loans alone, before a single road is built.
How the budget is made, and who watches it
The budget is not written in one day. It goes through a process that runs most of the year:
- Planning. The National Treasury sets the priorities and the spending limits in the Budget Policy Statement, usually in February.
- Estimates. Ministries and agencies say how much they need. The Treasury compiles everything and submits it to Parliament by 30 April.
- Public participation. Committees of Parliament collect views from citizens across the country.
- Approval. The Treasury Cabinet Secretary reads the budget in June. Parliament passes the Appropriation Act, which allows the spending, and the Finance Bill, which sets the taxes to pay for it.
- Spending. The new financial year starts on 1 July, and money starts flowing to ministries and counties.
Two offices keep watch. The Controller of Budget must approve before any money leaves government accounts, and publishes reports on how it was spent. The Auditor General then checks the books and flags money that cannot be accounted for. Their reports go to Parliament, and they are public, so anyone can read them.
Why this matters to you
You may never read a budget, but it reaches you every day.
Your taxes. When spending grows faster than revenue, the pressure to raise taxes grows too. That shows up in PAYE, VAT, fuel prices and levies on your payslip.
Your services. Whether your county hospital has drugs, whether a road near you gets tarmacked, and whether your child’s school gets its capitation on time all depend on how this money is shared and spent.
Your business. The government is the biggest buyer in the country. Ministries, counties and state agencies buy everything from stationery to software, and they do it through tenders. When the government is short of cash, suppliers wait. Money owed to suppliers by national and county governments stood at Sh465.87 billion in March 2026, and many have waited more than a year.
Your loans. Heavy local borrowing by the government can keep interest rates high for everyone else, including the small business owner looking for a loan.
Pay attention to it
Government spending is our money, collected from our salaries, our shopping and our businesses. The more of us understand where it goes, the harder it is to waste.
You do not need a degree in economics to follow it. Every year the Treasury publishes a short Mwananchi Guide that explains the budget in simple terms. The Controller of Budget and the Auditor General post their reports online. And when your county calls for public participation on its budget, go and speak.
If you run a business, read the budget every June. It tells you where the government will spend next, and where the opportunities are.
Elvis W.