Govt cuts 2027/28 budget by sh5.17 trillion
According to the Budget Circular dated September 15, 2026, issued to all accounting officers, next year’s budget envelope is 6.1% lower than the current financial year’s budget.
Finance Ministry Permanent Secretary and Secretary to the treasury, Ramathan Ggoobi. (File photo)
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The Government has cut its preliminary budget resource envelope for the 2027/28 financial year by sh5.17 trillion, setting it at sh79.22 trillion down from the sh84.39 trillion budget for the current financial year.
According to the Budget Circular dated September 15, 2026, issued to all accounting officers, next year’s budget envelope is 6.1% lower than the current financial year’s budget.
The reduction comes at a time when the finance ministry has vowed to tighten public spending, increase domestic revenue mobilisation and reduce reliance on borrowing as it kicked off preparations for the next national budget.
Although the budget circular does not yet spell out how the entire Sh79.22 trillion will be financed, Finance Ministry Permanent Secretary and Secretary to the treasury, Ramathan Ggoobi, asked the accounting officers to accommodate critical priorities through efficiency, reprioritisation and reallocation within the ceilings.
He said the reduction is intended to promote allocative efficiency and force government entities to concentrate resources on statutory obligations, essential services and high-impact interventions.
“The preliminary resource envelope underscores the need for stronger domestic revenue mobilisation, reduced reliance on borrowing, external financing, and allocative efficiency,” Ggoobi said.
According to the circular, human capital development programme will take the largest share of the allocation of sh12.7 trillion, equivalent to 26.7%, government and security will follow with sh9.9 trillion, representing 20.9%, while integrated transport infrastructure and services has been allocated sh7.9 trillion (16.7%).
The national development plan and its implementation will receive sh3 trillion, while private sector development will get sh2.3 trillion.
Regional development has been allocated sh2.1 trillion, while agro-industrialisation and sustainable energy development, will each receive sh1.5 trillion.
Ggoobi directed all accounting officers to live within their ceilings rather than simply carry forward previous spending patterns. He also directed Programme Working Groups to allocate resources strictly within the communicated programme ceilings.
“Government agencies should not make commitments without a budget; supplementary expenditure should only be allowed in exceptional circumstances; domestic arrears should not accumulate; staff should not be recruited without wage allocations; and projects should not begin before they are ready for implementation,” Ggoobi said.
He also instructed accounting officers to prioritise statutory and contractual obligations, essential service delivery, viable ongoing commitments and high-impact interventions aligned to the Government's ATMS (Agriculture, Tourism, Minerals, as well as Science, Technology, and Innovation) priorities.
The circular cautions agencies against spreading resources too thinly or simply reproducing historical vote allocations.
“Allocations shall be realistic, avoid spreading resources thinly and shall not merely reproduce historical vote shares,” the circular states.
Ggoobi said the agreed vote-level allocations should be submitted to the Ministry of Finance by October 15, 2026, for uploading onto the Programme Budgeting System.
Last week, the Minister of Finance Henry Musasizi released the Government’s priorities and strategies for the financial year 2027/28.
Musasizi said during the financial year, the Government plans to reduce dependence on borrowing and instead increase domestic revenue mobilisation by broadening the tax base, improving compliance, closing revenue leakages and increasing non-tax revenue.
It also plans to use technology and integrated data to identify economic activity outside the tax net.
Pension and insurance funds have also been identified as potential sources of long-term institutional capital.
Ggoobi said despite the reduction, government projects the economy to grow by 9.1% in the financial year 2027/28, up from the 7.6% projected for the financial year 2026/27.
The expected growth is partly linked to the anticipated commencement of commercial oil and gas production.
Ggoobi directed accounting officers to prioritise investments in ATMS alongside other critical enablers of economic growth.
“Next financial year, the economy is projected to grow at 9.1 percent, up from 7.6% projected for the current 2026/27 financial year, driven by the onset of commercial production of oil and gas,” the circular states.
According to the circular, the ministry of finance has also tightened controls on government spending.
Agencies will not be allowed to make commitments without corresponding budget provisions, while supplementary expenditure will only be permitted in exceptional circumstances.
The Government also wants to prevent the accumulation of domestic arrears and recruitment of staff without wage allocations.
The final 2027/28 budget could, however, change during the budgeting process as government refines its revenue projections, financing arrangements and spending priorities.
In the current financial year, the Government kept revising its budget until it reached sh84.3 trillion from sh69.399 trillion indicated in the Budget Framework paper approved by Parliament.