Blow to Treasury as KRA misses target by Sh20b

KRA Commissioner General Humphrey Wattanga. [File, Standard] The Kenya Revenue Authority missed its tax collection target by Sh20.1 billion in July alone, the National Treasury has revealed, dealing a severe blow to President William Ruto's economic plan. This also raises doubts on Kenya Kwanza administration's ability to fund key promises as the President races against time to deliver on his flagship Bottom-Up Economic Transformation Agenda before the 2027 polls. KRA collected Sh212.6 billion against a target of Sh232.7 billion in the first month of the 2025/26 financial year, according to the Treasury's 2025 Budget Review and Outlook Paper. The shortfall-which follows a Sh76 billion revenue miss in the previous financial year-has forced the Treasury to dramatically scale back its revenue projections, casting doubt on the feasibility of the government's development agenda with elections two years away. The John Mbadi-led Treasury has cut its full-year revenue target by Sh437 billion, reducing KRA's new tax target to Sh3,321.7 trillion from Sh3,758.7 trillion projected earlier. "The performance, coupled with the weak budget outturn in FY 2024/25, points to continued fiscal pressures and underscores the need for realistic revenue projections in preparing the FY 2026/27 budget," the Treasury stated in the budget planning document. The admission marks a significant retreat for the Ruto government that had pushed through controversial tax measures, including the since-withdrawn Finance Bill 2024, in pursuit of aggressive revenue targets. The revised targets threaten to undermine Ruto's Bottom-Up Economic Transformation Agenda, which requires substantial funding for five key pillars with elections just three years away. The Treasury has now ordered immediate austerity measures, stating that "The Government will entrench the Zero-Based Budgeting Approach to guide the prioritisation and allocation of the scarce resources." Ministries have been instructed to "rigorously review all planned programmes and projects," essentially forcing a scaling back of the very development programmes that form the cornerstone of Ruto's political Bottom Up election platform. President Ruto's Bottom-Up Economic Transformation Agenda, requires substantial funding for five key pillars including Agricultural Transformation; Micro, Small and Medium Enterprises Economy; Housing and Settlement; Healthcare; and the Digital Superhighway and Creative Economy. The latest shortfall continues a pattern of revenue underperformance that the Treasury initially attributed to "the withdrawal of the Finance Bill 2024 and protests that disrupted economic activities" in the previous financial year. The Treasury's U-turn appears to validate long-standing concerns from economists and former officials about the sustainability of Kenya Kwanza's aggressive revenue strategy. Former Treasury CS Njuguna Ndung'u had previously warned about the limitations of tax increases, stating at an IMF forum that "High tax rates create incentives for evasion" and "We're seeing this with our shrinking tax base." His comments, made before his dismissal from government, appear to confirm the trend following the persistent revenue shortfalls. The KRA has since initiated a restructuring to address the collection challenges, announcing a "major recruitment drive" and operational changes to "enhance service delivery and organisational agility." KRA Commissioner General Humphrey Wattanga previously highlighted the challenges of bringing Kenya's vast informal sector into the tax net.

Blow to Treasury as KRA misses target by Sh20b

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Blow to Treasury as KRA misses target by Sh20b

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