CONSUMPTION, NOT CONCRETE Who Ate Kenya's Development Money — and Is There Actually a Way Out?

Part 2 of 3: The Spending Paradox | The Daily Pulse

In Part 1, we established that Kenya's government is borrowing approximately Sh4 billion a day from the domestic market — crowding out businesses, starving the private sector of credit, and doing it all while paying interest rates that make the IMF's 3% loans look like a gift Kenya keeps refusing to unwrap. But Part 1 only asked how we are borrowing. The more uncomfortable question — the one that tends to get lost in the macroeconomic noise — is this: where is the money actually going?

The answer is not complicated. It is just inconvenient.

We are not borrowing to build. We are borrowing to consume. And in the process, we are handing future generations a bill without the receipt.

The Number That Should Stop Every Kenyan Cold

In the first seven months of the 2025/26 financial year, the government spent Sh885.7 billion on recurrent expenditure — the cost of keeping the state running day-to-day. In the same period, it spent Sh167.8 billion on development. That is a ratio of more than five to one. Consumption over construction. Salaries, operations, and debt interest over roads, hospitals, and irrigation schemes.

For the full 2025/26 budget, recurrent expenditure is projected at Sh3.07 trillion, while development sits at Sh707 billion. Or, to put it in the terms your household would understand: for every Sh10 the government spends, roughly Sh8 goes to keeping the lights on and paying yesterday's bills. About Sh2 goes toward building tomorrow.

This matters enormously because borrowing for consumption and borrowing for investment are fundamentally different moral and economic acts. When you borrow to build a dam, a future generation inherits both the debt and the dam — the asset that generates power, employment, and tax revenue to repay the loan. When you borrow to pay salaries and service old debt, you hand the next generation the bill. No dam. Just the invoice.

Kenya, right now, is doing the latter. Enthusiastically. Systematically. And apparently without adequate embarrassment.

Debt Eating Debt: The 800-Pound Gorilla in the Budget

The single largest line item in Kenya's recurrent expenditure is not salaries, not the wage bill, not even the infamous State House entertainment budget. It is debt service.

In the first seven months of this financial year, debt servicing consumed Sh1.075 trillion — equivalent to 79.9% of all tax revenue collected by the Kenya Revenue Authority in the same period. For every Sh100 that KRA collected, nearly Sh80 went straight to servicing past debt before a single road was patched, a single nurse was deployed, or a single bursary was disbursed.

That is not a budget. That is a treadmill.

The mechanics of the trap are almost elegant in their cruelty. The government borrows heavily at high domestic interest rates to cover recurrent costs. High interest payments increase future recurrent costs. Meanwhile, crowding out the private sector (as we explored in Part 1) slows economic growth, which reduces the tax base, which increases the fiscal deficit, which requires more borrowing. Rinse, repeat — at Sh4 billion per day.

The KRA itself is not helping matters. It missed its half-year collection target by Sh152.2 billion, collecting Sh1.161 trillion against a target of Sh1.314 trillion. Revenue underperformance does not soften the debt service obligation. It just means more borrowing to meet it.

The State House Problem: An Inconvenient Data Point

Let us talk about something that data makes unavoidable, even if political courtesy might prefer we look away.

By the end of January 2026, State House had spent Sh10.4 billion — Sh2.7 billion above the Sh7.7 billion approved for the entire financial year. The President's office exhausted its full annual recurrent allocation with five months still remaining in the fiscal year. CapitalFM

January alone saw Sh1.3 billion spent in a single month, averaging more than Sh42 million per day. Business Today Kenya. This is spending on domestic and foreign travel, hospitality, fuel, maintenance, and administrative support — not development. Not infrastructure. Not the kind of spending that compounds into national wealth.

The Office of the Deputy President has also exceeded its full-year recurrent allocation, overspending by Sh361.6 million.

Now hold that alongside this: the State Department for Roads spent just 31.9% of its development allocation. Housing hit 8.6%. Medical services reached 29%. Water and sanitation managed 39%.

The pattern writes itself. The offices with the least accountability to outcomes are the ones that consistently exceed their budgets. The offices responsible for the infrastructure that ordinary Kenyans actually need consistently fail to spend what has been allocated to them. One is a capacity problem. The other is a priority problem. Both are happening simultaneously, in the same fiscal year, in the same country.

Controller of Budget Dr. Margaret Nyakang'o has been admirably direct about the implications, warning that State House's early overspending "presented a risk of budget depletion before the end of the financial year, leading to budget non-credibility." She might have added: it also sends a very specific message about whose convenience the budget is designed to protect.

The Development Execution Collapse: When Allocated Is Not the Same as Spent

There is a particularly Kenyan tragedy buried in the budget execution numbers, and it deserves more attention than it typically gets.

The debate about Kenya's fiscal crisis often focuses entirely on whether enough money is being raised or borrowed. The quieter scandal is that even when money is allocated for development — for roads, water, health facilities, housing — a significant share of it never reaches the projects.

Roads: 31.9% executed. Housing: 8.6%. Medical services: 29%. The county story is equally striking: in the first nine months of FY 2024/25, Kenya's 47 county governments collectively spent Sh286.49 billion, but only Sh56.87 billion — 20% — went to development programs. The remaining 80% went to recurrent expenditure, including salaries, allowances, and operational costs. Nyakundi Report

Even at the county level, Nairobi — the economic engine of the country — spent only 12.2% of its budget on development.

The reasons are structural: weak project preparation, delayed exchequer releases, procurement bottlenecks, and cash flow constraints that prevent ministries from accessing even their approved allocations. But the effect is simple and devastating. Kenya is not just borrowing for consumption instead of investment. It is also failing to invest even when it tries to.

This is the double failure at the heart of Kenya's fiscal moment — and it is why any conversation about new financing mechanisms must begin with an honest reckoning about implementation capacity.

The Exit Ramps: What Is Actually on the Table

Are we doomed? No. But the exit requires political choices that are far less comfortable than the ones currently being made. Let us examine what is genuinely on offer — with appropriate skepticism intact.

The National Infrastructure Fund: Ambition Meets Track Record

The government has established the National Infrastructure Fund, modelled loosely on Singapore's Temasek Holdings, designed to mobilize Sh5 trillion over the next decade through asset monetization, pension fund participation, and private capital. The headline claim: every government shilling invested through the fund is expected to crowd in up to Sh10 from long-term investors.

That is an impressive multiplier — if it works. The Temasek model is real and has transformed Singapore's economy. But Singapore in the 1970s had something Kenya needs to honestly audit right now: institutional capacity, low corruption, and the discipline to execute.

The Treasury's agreement to sell a 15% stake in Safaricom to Vodacom Group for Sh204.3 billion has already raised pointed questions about why this transaction wasn't structured as an NSE listing that Kenyan retail investors could access. Selling the family silver/gold jewelry is not inherently wrong — but selling it privately, without transparency, and then claiming proceeds will fund development is a story that requires more than a press conference to verify.

The harder question: if the government cannot execute 8.6% of its housing development budget, why will a new fund change the implementation equation?

Debt-for-Development Swaps: Creative Finance Worth Watching

Kenya has secured a $1 billion debt-for-food security swap with the U.S. International Development Finance Corporation, converting expensive commercial debt into lower-cost financing targeted at agricultural resilience. Similar structures have worked in Ecuador, Belize, and Gabon — debt-for-nature arrangements that have unlocked meaningful conservation and development finance.

These instruments are genuinely innovative and worth pursuing more aggressively. The principle is sound: use the credibility of international partners to secure better borrowing terms, then direct the interest savings toward productive sectors rather than the recurrent expenditure vortex.

The catch is always discipline. The savings must actually reach the intended sectors. They must not disappear into the same machinery that turned a Sh7.7 billion annual State House allocation into a Sh10.4 billion seven-month spend. Without ringfenced implementation frameworks, debt swaps are just debt with better marketing.

The IMF Programme: Uncomfortable but Potentially Useful

Kenya has entered a new IMF-supported programme, and Dr. Nyakang'o has offered a notable caution: "We should not take IMF programmes wholesale. We need to speak up." This is exactly the right framing.

The value of an IMF programme is not primarily the money. It is the political cover it provides for decisions the government knows it needs to make but cannot easily justify domestically — cutting wasteful recurrent expenditure, rationalizing executive overheads, and redirecting fiscal savings toward development. The IMF's conditionality is not an imposition to be resented; used intelligently, it is a shield for difficult-but-necessary reforms.

The risk, as Dr. Nyakang'o correctly identifies, is front-loaded austerity that protects rigid recurrent costs — the wage bill, debt service, executive overheads — while cutting development and social spending, which are politically softer targets. If Kenya uses IMF programme discipline to slash road construction budgets while the State House continues to spend Sh42 million a day, the programme will have achieved the opposite of its intention.

The Least Glamorous Solution: Execute the Budget You Already Have

Before chasing new financing mechanisms, there is one reform that requires no external partners, no sovereign wealth fund, and no international press release: spend the development money that has already been allocated.

Roads are at 31.9%. Housing at 8.6%. Fix the procurement bottlenecks. Ensure timely exchequer releases. Hold accounting officers accountable for underperformance. Counties received only 49.5% of their approved allocations — that is a pipeline problem, not a resource problem. Fixing it costs political will, not additional borrowing.

This is the unsexy solution that every analyst recommends and no politician campaigns on. It is also, arguably, the highest-return intervention available.

The Uncomfortable Conclusion

The technical solutions exist. They are documented, debated, and increasingly well-understood. Debt swaps can lower financing costs. The NIF could attract long-term capital. IMF programmes can anchor fiscal discipline. Budget execution reforms can multiply the impact of every shilling already allocated.

The problem — and it has always been the problem — is political will.

The current trajectory leads to a fiscal year 2026/27 in which recurrent expenditure is projected at Sh3.5 trillion versus Sh749.5 billion for development. Debt service will continue consuming the lion's share of revenue. The domestic borrowing machine will continue crowding out private sector credit. And the State House will, presumably, need another supplementary budget.

Dr. Nyakang'o asked the question that should be Parliament's standing agenda item: "Are public resources being deployed to improve citizens' lived realities?"

The data answers that question. What remains is whether the people whose job it is to change the answer are prepared to do so.

The pressure — and ultimately the power — belongs to the public. Parliament is currently inviting participation on the Budget Policy Statement and Debt Management Strategy. That window is open. Whether Kenyans choose to use it is another matter entirely.

📌 This is Part 2 of a three-part series on Kenya's economic crossroads.

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About the Author

Dr. Julius Kirimi Sindi is a global expert in research funding, policy impact, and donor relations. With extensive experience in analyzing philanthropy, business, and science funding, Dr. Sindi fosters sustainable and inclusive research ecosystems. He has facilitated international business relationships across Africa, Europe, and Asia. His upcoming book, "The Blueprint of Life Well Lived," explores successful strategies for navigating complex business environments while achieving sustainable growth. He is the author of an upcoming book "How Societies Change and Why Most Reforms Fail," which introduces an African Theory of Scaling rooted in emotional truth, political safety, and system coherence. I hope to publish "CHANGING THE BATTERIES - How to Renew Purpose, Growth, and Connection When Your Light Grows Dim" as soon as possible. He is also the creator of The Daily Pulse, a widely read LinkedIn newsletter offering sharp, human-centered analysis of policy, politics, and development.