Why Kenya's Next Finance Minister Matters More Than Its President

Kenya's finances are so constrained that the room for meaningful policy decision-making sits almost entirely in how well the Treasury manages its balance sheet. Writes Cuba Houghton, a Kenyan economist and public finance practitioner.

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 As Kenya approaches the one year countdown to its next election cycle, the country's finances are in a tight spot. 

Public debt burden now exceeds 65% of GDP, eating up more than half of its already underperforming tax revenues. Taxes themselves already feel high and real incomes have only just started recovering, narrowing the scope for new revenue. Donor aid is declining in favour of trade and investment. From the revenue side, Kenya's budget may be approaching its practical limit.

Spending, meanwhile, has continued to climb.

State expenditure has risen to nearly a quarter of GDP since the COVID-19 crisis. A bloated wage bill is part of the story. Over 400 state corporations spread across 87 ministries, departments and agencies, plus 47 county governments, now employ over one million Kenyans and cost 18% of the annual budget.

Successive governments have relied on two strategies: kick the can down the road (borrow more) and bring in the private sector.

Debt payments are another major driver, accounting for nearly half of total government spending in Kenya’s budget. The human cost of that number is not abstract. In 2010, the share of government revenue spent on debt and on education were equal at roughly 30%. By 2023, debt repayments were consuming nearly three times what education received, despite less than 3% of the education budget having been borrowed in the preceding five years.