Kenya’s financial plans have hit a stumbling block after Treasury Cabinet Secretary John Mbadi disclosed that the country would lose Sh52 billion in the 2024/25 financial year due to the United States cutting funding to the United States Agency for International Development (USAID).

Speaking before the Senate, Mbadi detailed the sectors set to feel the strain, listing education, governance, food security and health as the most affected.

He clarified that USAID funds were not factored into the national budget but played a crucial role in supplementing key government initiatives.

A significant portion of the lost funding—Sh16.5 billion—was earmarked for food security, supporting arid and semi-arid lands (ASALs), aiding refugees in Dadaab and Kakuma, and investing in agricultural cooperatives and modern technology.

The education sector was to receive Sh2.8 billion to improve early-grade literacy in public schools, provide scholarships, strengthen TVET institutions, train teachers and support the Open University of Kenya.

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Meanwhile, Sh1.1 billion in governance aid would have been directed towards strengthening institutions, supporting voter education for the 2027 elections, preventing violence in coastal counties, and backing various government-led initiatives.

With this unexpected gap, the government is now forced to rework its financial strategy.

In the short term, authorities plan to restructure the current budget to prioritise essential services while engaging development partners and private stakeholders to bridge the shortfall.

For long-term sustainability, Mbadi stressed the need for self-reliance by bolstering the economy.

The government intends to achieve this by advancing agricultural transformation, promoting micro, small and medium enterprises, expanding digital infrastructure, and rolling out affordable housing.

Additional steps include curbing unnecessary expenditure, automating procurement for transparency, and enforcing a zero-budgeting model across ministries.

"Even as we pursue these risk mitigation measures, we remain hopeful that we shall continue strengthening our bilateral ties with the U.S. notwithstanding of the outcome of the 90-day review on foreign aid," Mbadi said.

The withdrawal of USAID funding presents a significant challenge to Kenya’s financial plans, forcing the government to rethink its priorities and explore alternative funding strategies.

While immediate interventions may cushion the impact, long-term solutions will require structural reforms and economic resilience to reduce reliance on external aid.

How effectively the government navigates this crisis will determine the stability of key sectors and the country’s broader development agenda.