Nairobi: The government is focused on automating and digitizing Kenya Revenue Authority tax and revenue administration in order to seal revenue loopholes and enhance the efficiency of the tax system. Speaking during the Public Sector Hearings for the FY 2026/27 and the Medium-Term Budget hearings held at the Kenyatta International Convention Centre, Principal Secretary National Treasury Dr. Chris Kiptoo highlighted the initiatives aimed at enhancing tax compliance, expanding the tax base, and minimizing expenditure.
According to Kenya News Agency, Dr. Kiptoo emphasized that the Tax Policy and the Tax Administration reform measures, as part of the Medium-Term Revenue Strategy, are designed to progressively strengthen tax revenue mobilization to 20 percent of the Gross Domestic Product (GDP) over the Medium-Term 2026/27. He stressed the importance of fiscal sustainability through reforms that foster inclusive growth and job creation, particularly by revitalizing sectors such as manufacturing.
Dr. Kiptoo outlined that addressing challenges in value chains like cement, steel, leather, and edible oils, as well as reducing the cost of power, could significantly contribute to the country's economic growth. He also noted that the macroeconomic medium-term reforms being implemented for the 2026/2027 Medium-Term Budget aim to bolster macroeconomic stability, support government efforts to safeguard livelihoods, create jobs, revive businesses, and drive economic recovery.
The ministerial budget ceiling for FY 2026/27 is projected at Sh2,818.6 billion, comprising Sh1,992.9 billion in recurrent expenditure and Sh825.7 billion in development expenditure. Dr. Kiptoo mentioned that the 2026 Budget Policy Statement will elaborate on the progress in implementing government policy priorities anchored on the Bottom-Up Economic Transformation Agenda.
Dr. Kiptoo also shared that the Macroeconomic outlook for FY 2026/27 and the Medium-Term Budget projects global economic growth at 3.2 percent in 2025 and 3.1 percent in 2026. The growth in 2025 is expected to be driven by increased exports to the United States and strong consumer spending, while the slowdown in 2026 is attributed to higher tariff rates and trade policy uncertainty. Nonetheless, Kenya's economy is projected to grow robustly at 4.9 percent and 5.0 percent in the first and second quarters of 2025, respectively.
The sectors contributing to this growth include mining and quarrying, agriculture, and real estate. Interest rates have declined, with the rate in October 2025 at 9.3 percent compared to 12.1 percent in October 2024. The 91-day Treasury Bills rate also decreased to 7.9 percent from 15.0 percent over the same period. Lending rates fell to 15.1 percent in September 2025 from a peak of 17.2 percent in November 2024, with further declines anticipated.
As capital market indicators continue to improve, investor confidence has strengthened, enhancing activities in the Nairobi Securities Exchange. The 20 Share Index improved by 63.6 percent to 3,117 points in October 2025, up from 1,906 points in October 2024.