NAIROBI, Kenya, Nov 19 – The Kenya Revenue Authority (KRA) missed its revenue target by Sh90 billion in the first quarter of the 2025/26 financial year, with the National Treasury warning that the sharp decline in ordinary revenue collection is already straining fiscal operations and widening the deficit.
Treasury Principal Secretary Chris Kiptoo on Wednesday said all major tax heads underperformed in the three months to September, signalling deeper structural challenges in tax administration and compliance—alongside the impact of recent policy changes.
“The underperformance was mainly on account of the shortfall registered in ordinary revenue of Sh90.0 billion,” he said.
“Total revenues grew by 1.7 per cent by end of September 2025, compared to a growth of 10.8 percent by end of September 2024.”
KRA collected Sh657.17 billion between July and September 2025, against a target of Sh707.03 billion.
Ordinary revenues contracted by 2.9 per cent, a sharp reversal from the 10.1 percent growth recorded during the same period last year.
Compliance gaps
Treasury attributed the slump to widening compliance gaps, administrative inefficiencies in enforcement, and revenue-reducing measures enacted under the Finance Act 2025, which have eroded KRA’s projected tax base.
Slower-than-expected activity in key sectors also weakened consumption-driven taxes.
The weak performance has pushed government finances into early pressure, with the fiscal deficit in the first quarter rising to Sh280.4 billion, above the targeted Sh189.5 billion.
Treasury linked the expanding deficit directly to KRA’s lower-than-expected tax receipts, noting that expenditure trends remain difficult to adjust in the short term.
Kiptoo said that as KRA intensifies efforts to seal compliance loopholes, the government will be compelled to tighten spending in the upcoming supplementary budget to realign fiscal projections with the reality of reduced tax inflows.
Higher-than-planned disbursements in both recurrent and development budgets, he added, have further amplified the strain caused by KRA’s underperformance.
Treasury cautioned that unless revenue collection stabilizes in the coming months, the government may face a deeper financing gap in the 2025/26 fiscal year, with rising domestic borrowing already signalling tighter fiscal conditions.