In its latest economic assessment of Kenya, the World Bank has raised serious concerns over the country’s inability to rein in recurrent expenditures, warning that this fiscal imbalance threatens long-term growth and undermines development spending.
According to the 2025 edition of the Kenya Economic Update, recurrent expenditures including public sector wages, debt-service costs and other fixed obligations, now consume 56.4 percent of total public spending, and about 75.8 percent of the government’s revenue (including grants). This leaves little room for flexible, growth-oriented spending, such as infrastructure, education, and development projects.
As a result of this skewed spending structure, the fiscal deficit for the 2024/25 financial year surged to 5.9 percent of GDP ,significantly above the 4.3 percent target set in the supplementary budget. To bridge the shortfall, the government increased borrowing, relying heavily on domestic debt instruments a move that raises debt servicing costs and reduces fiscal space for productive investment.
The World Bank cautioned that these persistent fiscal slippages and structural rigidities in recurrent expenditure risk undermining Kenya’s macroeconomic stability, even in the face of recent growth in GDP and a rebound in some private-sector activity.
Moreover, the shift in government priorities is clear: rather than trimming recurrent costs, the government has been cutting development expenditure. In 2024/25, development spending fell to just 3.4 percent of GDP, a steep drop from the 7.9 percent recorded a decade ago. The consequence: vital infrastructure and social services projects ,which historically drive long-term economic growth are being sidelined whenever the budget is rebalanced.
The World Bank’s warning is part of a broader caution: while Kenya’s macroeconomic conditions including stable inflation and exchange rate, higher foreign-exchange reserves, and a rebound in credit to the private sector appear positive, the country’s fiscal vulnerabilities remain its biggest economic risk.
Unless structural reforms are implemented such as revenue-enhancing measures, better public-spending controls, and efforts to reduce rigid recurrent outlays, Kenya may continue to struggle with constrained development spending, mounting debt-servicing burdens, and limited capacity to invest in jobs, infrastructure, and public services
