Treasury CS Mbadi unveils reforms to stabilize and grow economy
George Gerish and Victor Kiplagat-KNA
The Government is fully supporting the petroleum sector through comprehensive fiscal and structural reforms. The National Treasury and Economic Planning Cabinet Secretary John Mbadi said the reforms target to stabilise and grow the economy.
Addressing key stakeholders in the petroleum industry during the second quarter 2025 briefing organised by the Petroleum Institute of East Africa (PIEA), the CS applauded petroleum stakeholders for their role in creating jobs and the economic growth of Kenya.
The CS said PIEA contributions have significantly shaped Kenya’s employment landscape, tax base, and regional capacity in oil and gas.
Mbadi stated that Kenya’s economy has demonstrated resilience, recording an average growth rate of 5.2 per cent between 2023 and 2024, outpacing both the global average of 3.3 per cent and Sub-Saharan Africa’s 3.8 per cent.
He attributed this performance to deliberate policy choices and a diversified economic base.
Mbadi however cautioned that external shocks, fiscal constraints, and structural weaknesses in the real economy threaten economic stability.
Further, the CS cited global conflicts and pandemics as triggers for rising inflation and supply shortages, which have driven up the cost of essential commodities such as fuel, edible oils, and fertilisers.
“Domestically, the country is grappling with a shrinking fiscal space as the public debt ratio reaches 69.7 per cent of GDP (Gross Domestic Product),” Mbadi observed.
Additionally, he highlighted that interest payments had overtaken all other recurrent expenditures, including the national wage bill and county allocations, underlining the urgency to restore Kenya’s external creditworthiness.
“Public debt servicing now consumes 63 per cent of ordinary revenue. The interest cost has become the single largest recurrent expenditure item, exceeding even salaries and county allocations,” he added.
The CS also acknowledged growing public frustration with the disconnect between reported economic growth and lived realities.
He explained that the bulk of recent growth has been driven by large infrastructure projects like the Standard Gauge Railway and Nairobi Expressway.
According to the CS, sectors like agriculture have been underfunded, forcing the country to increasingly rely on food imports that have risen from 10 per cent to 17 per cent of all imports over the past decade.
“This paradox of impressive GDP growth and economic hardship is not a mystery. It’s a reflection of past investment choices that did not sufficiently benefit the productive economy,” he expounded.
Mbadi cited inflation drop from a peak of 9.6 per cent in October 2022 to 3.8 per cent in May 2025, accompanied by a notable decline in prices of basic foodstuffs and energy.
“A 2-kilogram packet of sifted maize flour, for instance, now retails at Sh156.9, down from Sh177.7 in 2022,” he said.
The Central Bank reduced CBK lending rate from 13 per cent in August 2024 to 9.75 per cent in June 2025, which has also helped stimulate economic growth from reduced commercial banks lending rates.
The shilling has also strengthened, appreciating from Sh159.7 to Sh129.3 to the US dollar, while foreign reserves have reached USD10.5 billion—equivalent to 4.7 months of import cover.
The CS highlighted several measures underway to further enhance resilience including broadening the tax base through digitization at the Kenya Revenue Authority (KRA), settling verified pending bills to unlock liquidity, and improving fiscal transparency through a comprehensive audit of public debt initiated by the Auditor General.
In order to curb unrealistic budget estimates, Mbadi disclosed that the Treasury had adopted zero-based budgeting and adjusted revenue projections to align with actual trends.