The National Treasury has increased its domestic borrowing target for the financial year ending June 30 by 52.29 percent, or Sh570 billion, raising the total from Sh1.09 trillion to Sh1.66 trillion. The move reflects efforts to close a widening financing gap as the fiscal year approaches its final months.
By the end of March 2026, Sh965.87 billion had already been borrowed from the domestic market. Treasury records show that the revised target includes Sh1.12 trillion in net domestic borrowing and Sh544.25 billion in rollovers of maturing internal debt.
At the same time, projected total revenue for the 2025/26 financial year has been revised upward to Sh5.15 trillion. Out of this, Sh3.36 trillion has already been collected, leaving a remaining gap of Sh1.79 trillion to be covered within the final three months of the fiscal period.
To bridge this gap, the government expects the Kenya Revenue Authority (KRA) to raise Sh883 billion during the remaining period. The domestic market is also expected to contribute an additional Sh904 billion. Alongside this, Treasury is continuing discussions on external financing options, including World Bank budget support and the remaining Sh150.76 billion balance from Eurobond proceeds.
The shift toward increased domestic borrowing places additional pressure on local financial institutions, including banks, pension funds, and insurers, which also provide credit to businesses and households. This raises the risk of crowding out private sector borrowing in an already tight credit environment.
Even as the government explores external financing alternatives such as the delayed 750 million dollar World Bank DPO 7 facility, domestic borrowing remains the immediate source of funding. Overall, the figures point to a government adjusting its budget needs and relying more heavily on local liquidity while seeking to balance revenue collection and external support before the fiscal year closes.
