Balancing Kenya’s budget: Lessons from Singapore

Kenya enters the 2025/26 fiscal year with a projected budget deficit of 4.8 percent of GDP, reflecting the enduring imbalance between government spending and revenue generation.

Despite recent austerity measures, debt servicing now consumes more than six percent of GDP, equivalent to nearly 67 percent of ordinary revenues, thus, leaving little room for capital investments and essential services.

This scenario stands in contrast to Singapore’s fiscal model under Lee Kuan Yew, who steered the country from a fragile post-independence economy to global financial stability by institutionalising strict budget discipline, prioritising savings, and rejecting populist overspending.

While Kenya’s tax-to-GDP ratio remains at a modest 14–15 percent, well below the government’s target of 20 percent, efforts to raise taxes have met fierce public resistance. The recent rejection of the Finance Bill 2024 highlighted the delicate balance between revenue mobilisation and public trust.

In contrast, Lee Kuan Yew’s Singapore kept its tax rates moderate but focused aggressively on compliance, administrative efficiency, and linking tax collection to visible, high-quality public services.

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By fostering credibility and trust in state institutions, Singapore grew its tax base without triggering social unrest, an approach Kenya must consider as it modernises revenue administration.

Recurrent expenditure in Kenya absorbs approximately 73 percent of the total budget, leaving just 27 percent for development and infrastructure. Much of this is driven by a bloated public wage bill and rising debt obligations.

Singapore, under Lee, kept total government spending below 17 percent of GDP, supported by a small but highly professionalised civil service.

Performance-based promotions, rigorous expenditure vetting, and zero tolerance for wastage ensured that recurrent spending was kept within productive limits.

Kenya’s ongoing reforms such as digitising the payroll and transitioning to zero-based budgeting are promising but must be implemented consistently and backed by political will.

Kenya plans to finance its deficit through domestic borrowing (around 3.3 percent of GDP) and external borrowing (1.5 percent of GDP).

While this strategy may plug short-term gaps, overreliance on domestic markets raises interest rates and crowds out private investment. Lee Kuan Yew took a cautious approach to borrowing, restricting it to infrastructure with high returns and avoiding debt accumulation for consumption.

Singapore’s capital projects were meticulously costed, publicly justified, and closely monitored- practices that Kenya must adopt if it hopes to secure economic returns on public investment and avoid fiscal distress.

At 63–66 percent of GDP, Kenya’s public debt exceeds the East African Community’s recommended threshold of 55 percent, raising concerns about sustainability.

In comparison, Singapore in its formative years kept public debt well below 40 percent of GDP, supported by constitutional safeguards and a long-term vision of intergenerational equity.

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Kenya’s medium-term plan to reduce its debt burden is commendable, but it must be accompanied by tangible cuts to non-essential spending, stronger institutions for public financial management, and credible fiscal targets that resist political pressure.

Kenya’s path to a balanced budget is difficult but not impossible. It demands a structural rethinking of public finance, similar to what Lee Kuan Yew executed in Singapore.

Kenya may not replicate Singapore’s journey, but it can adopt its principles: live within means, invest for growth, and govern with credibility. A balanced budget, ultimately, is less about numbers and more about national purpose.

The writer is a Public Finance Management & Global Financial Governance Expert. He is a Knowledge Management Advisor with GIZ-African Union.