By Benadeta Mwaura - Reporter
Kenya, June 11, 2026 - Treasury Cabinet Secretary John Mbadi used the presentation of the Sh4.82 trillion 2026/27 budget to unveil a series of policy measures aimed at tightening fiscal discipline, strengthening the banking sector, clearing pending bills and accelerating the digitization of government operations.
The policy pronouncements, announced during the budget reading in Parliament on Thursday, form part of the government's broader strategy to improve public finance management while supporting economic growth amid revenue constraints and mounting expenditure pressures.
One of the most significant announcements was the government's decision to fully digitize public procurement beginning July 1, 2026.
"No public procurement will be conducted outside the Electronic Government Procurement System from July 1," Mbadi announced, adding that Treasury will end all exemptions previously granted to government entities.
The move is expected to enhance transparency, reduce procurement-related corruption and improve accountability in the management of public resources.
KSh155 Billion Pending Bills Settlement Plan#
Mbadi also unveiled a plan to address the longstanding challenge of pending bills that have strained businesses and contractors supplying goods and services to government agencies.
According to the Treasury, the government intends to settle KSh155.3 billion in verified pending bills through direct budget allocations and securitization arrangements over the next two years.
The issue of pending bills has been a major concern among businesses, with many firms citing delayed government payments as a key factor behind liquidity challenges and business closures.
Relief for Banks on Capital Requirements#
In a move likely to be welcomed by smaller lenders, the Treasury proposed extending the deadline for banks to meet the Sh10 billion minimum core capital requirement by an additional three years.
The new deadline would move from the current timeline to December 31, 2032, giving financial institutions more time to raise capital and comply with regulatory requirements.
Mbadi said the extension would allow for a more structured recapitalization process across the banking sector.
The proposal comes at a time when several banks are still adjusting to tougher capital requirements aimed at creating a stronger and more resilient banking industry.
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Agricultural Insurance Reforms#
The Treasury is also seeking changes to the Insurance Act to establish agricultural insurance as a standalone class of insurance business.
The proposal is designed to strengthen risk management in the agricultural sector, which remains highly vulnerable to droughts, floods and other climate-related shocks.
The reforms could encourage greater uptake of crop and livestock insurance among farmers while improving the regulatory framework governing agricultural risk protection.
Treasury Single Account Expansion to Counties#
Another notable policy shift targets county governments.
Mbadi announced that the government will begin expanding implementation of the Treasury Single Account (TSA) framework to counties from July 1, a move expected to overhaul county payment and requisition systems.
The TSA is intended to centralize government cash management, improve oversight of public funds and reduce idle balances spread across multiple accounts.
Treasury has long argued that full implementation of the system would enhance efficiency and strengthen fiscal control across both levels of government.
Fiscal Discipline at the Centre#
The announcements come as the government seeks to balance development spending with fiscal consolidation efforts.
Mbadi has repeatedly warned that Kenya's fiscal space remains constrained by debt servicing obligations, slower revenue growth and rising expenditure demands.
The 2026/27 budget is anchored on a target fiscal deficit of 5.3 percent of GDP, with Treasury emphasizing expenditure rationalization, improved revenue administration and digital reforms as key pillars of its fiscal strategy.
Taken together, the policy measures signal a Treasury increasingly focused on efficiency, transparency and tighter control of public finances as Kenya navigates a challenging economic environment while seeking to sustain growth and investor confidence.