The value of development projects funded through taxes in the financial year ended June 2026 grew at the fastest pace in more than a decade, signalling a renewed push to finance infrastructure ahead of the 2027 General Election.
Exchequer-funded development expenditure jumped 36.4 percent to Sh457.2 billion, latest Treasury disclosures show, reversing years of budget cuts that had steadily squeezed capital investment to below one-tenth of total national government spending.
The increase, which excludes funding from loans and grants, marked the biggest annual expansion in at least a decade.
This ended a prolonged run in which capital spending either declined or posted only modest recoveries, with debt repayments and recurrent expenditure dominating government spending of taxpayers’ funds.
Development expenditure, directly from taxes, had fallen for three consecutive years between 2020/21 and 2022/23 before posting modest growth over the following two financial years.
The latest annual spending represents an additional Sh122.1 billion channelled to government-funded projects compared with the previous financial year ended June 2025.
The higher spending reflects the government’s policy to accelerate implementation of projects under President William Ruto’s Bottom-Up Economic Transformation Agenda and the country’s long-term development blueprint, the Vision 2030.
Treasury officials insist priority is given to completing ongoing projects, particularly infrastructure works with the greatest potential to reduce poverty, create jobs and spur economic activity, rather than launching new ones.
The government also protected funding for counterpart financing required to unlock billions of shillings in loans and grants from development partners, while directing additional resources to strategic national programmes, regional integration initiatives, social equity and environmental conservation.
Road infrastructure emerged among the biggest beneficiaries of the renewed investment drive, receiving Sh92.3 billion, a 44.2 percent increase from the previous financial year.
The higher spending coincided with the resumption of several road projects that had stalled after contractors accumulated billions of shillings in pending bills during the government’s fiscal consolidation programme.
Agriculture also featured in renewed development spending plans, with funding for crop development rising 82 percent to Sh45.7 billion, reflecting increased emphasis on food production through projects such as fertiliser subsidy.
Water and sanitation recorded the fastest growth among the major departments, with allocations expanding 124.9 percent to Sh34.5 billion, more than doubling from the previous financial year.
Energy development funding increased 34.8 percent to Sh22.7 billion, supporting investments in electricity infrastructure and power transmission projects.
The distribution of development spending points to a government raising investment in transport and logistics, agriculture, water and energy projects, sectors that have potential to stimulate economic activity and attract private investment.
The latest increase lifted development spending to 10.97 percent of the Sh4.17 trillion spent by the national government during the financial year to June 2026.
Although that represents the first significant recovery in years, the ratio remains less than half the level recorded a decade ago, underscoring the continued dominance of recurrent expenditure in the national budget.
As a share of total national government expenditure, development spending from taxes shrank from 23 percent in 2016/17 to 9.15 percent in 2023/24 and 9.39 percent in 2024/25, highlighting how investment spending was gradually crowded out by recurrent expenditure.
The latest rebound also comes after the Treasury acknowledged it had repeatedly fallen short of the Public Finance Management (PFM) Act requirement that total development expenditure[including portion from development partners] account for at least 30 percent of spending.
In the latest Budget Policy Statement tabled in Parliament last February, Treasury officials said actual development spending in the 2024/25 financial year, for example, accounted for 25.1 percent of ministerial expenditure, below the statutory threshold. They blamed the shortfall on “expenditure rationalisation measures undertaken during budget execution”.
The Treasury added that the lower-than-expected share reflected spending cuts implemented during the year, with development outlays falling short of the earlier projection of 26.2 percent.
The rebound nonetheless comes against a backdrop of persistent delays in implementing development projects, suggesting that higher allocations alone may not automatically translate into faster execution of infrastructure ventures.
The Parliamentary Budget Office notes that “there have been persistently low absorption rates of development expenditure in recent years, which has led to stalled progress on key projects despite overall budget increases”.
The findings of the office, which advises lawmakers on fiscal affairs, highlight longstanding bottlenecks in procurement, project execution and fund absorption that continue to delay completion of public investment projects.
