Kenya faces Ksh 52 Billion budget gap over USAID freeze

Nairobi, Kenya – March 6, 2025 – Kenya is staring at a Ksh 52 billion funding gap for the 2024/2025 fiscal year following the United States’ decision to pause USAID financial aid.

Treasury Cabinet Secretary John Mbadi has cautioned that the freeze will significantly impact key sectors, including healthcare, education, and food security.

Speaking before the Senate on Wednesday, Mbadi underscored the longstanding relationship between Kenya and the U.S., acknowledging that American support has been crucial in enhancing education, governance, and economic growth.

“The United States has been a key partner in strengthening Kenya’s healthcare systems, expanding educational opportunities, and boosting economic development through trade, agriculture, and infrastructure,” he stated.

Impact of USAID Funding Freeze

The US funding halt follows an executive order issued by the U.S. government, imposing a 90-day suspension on foreign development assistance programs. Kenya has been a major recipient of USAID support under the Development Cooperation Framework Agreement (DCFA), signed in 2019, which saw contributions grow from $50 million to nearly $1.7 billion (Ksh 220 billion). The agreement is set to remain in place until September 2028.

According to Mbadi, USAID-funded initiatives cover various sectors, including:

Education – Ksh 2.9 billion
Governance – Ksh 1.1 billion
Food security – Ksh 16.5 billion

Programs at risk include early grade literacy initiatives, teacher training, scholarships for Technical and Vocational Education and Training (TVET) students, and support for institutions like the newly established Open University of Kenya.

Additionally, USAID has been pivotal in humanitarian aid, benefiting over 2.5 million vulnerable people, including refugees in Dadaab and Kakuma.

“The total assistance expected from USAID for the fiscal year 2024/2025 was $405.4 million (Ksh 52 billion), supporting programs in health, economic growth, water, and environmental conservation,” Mbadi stated.

Government’s Response to the Funding Gap

While USAID’s financial assistance does not flow directly into the national budget—being managed through local and international implementing partners—its absence presents a significant challenge for Kenya.

In response, the government is reviewing budget allocations to ensure that essential services remain uninterrupted. Mbadi indicated that adjustments may be made in Supplementary Budget III to cushion the most affected sectors.

“We are prioritizing key areas, particularly in healthcare, education, governance, and food security, to mitigate the effects of this funding shortfall,” he said.

Additionally, the government is engaging with alternative development partners to secure supplementary funding, while urging county governments to take proactive measures in sustaining devolved services.

Under Kenya’s Universal Health Coverage (UHC) reforms, vulnerable populations will continue receiving critical medical services, including cancer screenings, dialysis, kidney transplants, and essential medications, despite the funding cut.

Commitment to Service Delivery

Mbadi reassured the Senate that the government remains committed to ensuring that vital programs remain operational, even as it navigates the challenges posed by the U.S. aid freeze.

“Kenya will continue to work towards sustainable solutions to maintain essential public services and protect its most vulnerable citizens,” he affirmed.