Cash generated from non-tax revenue streams, such as fees on services, has declined for the first time in four years, signalling the fading of windfall income that had boosted government coffers, such as mop-up of surplus money from State agencies and a surge in fees collected through the e-Citizen platform.
Treasury data shows that non-tax receipts for the nine months to March 2026 fell by 10.65 percent to Sh109.3 billion from Sh122.3 billion in a similar period last year.
The contraction, the first under President William Ruto’s administration, marks a sharp reversal from the previous financial year when collections more than doubled, surging by 135.15 percent in what now appears to have been an exceptional spike driven by one-off inflows.
Non-tax revenue comprises a mix of income streams outside taxation, including licenses under the Traffic Act, land revenue, investment income, surplus funds from semi-autonomous government agencies (SAGAs), fees under interior and citizen services departments, fines and forfeitures, as well as royalties.
Non-tax revenue had been on an upward trajectory since pandemic-era disruptions, which saw collections in the review period plunge more than 30 percent in the 2020/21 and 2021/22 financial years.
A gradual recovery followed, with modest growth in 2022/23 and 2023/24, before the dramatic surge in 2024/25.
However, the sharp increase last year now appears to have set a high base that is proving difficult to maintain, with the latest figures pointing to a normalisation rather than sustained growth.
Despite the decline, collections remain above historical averages, having crossed the Sh100 billion mark in the nine-month review period for a second consecutive year. This is an indication that the government has expanded its non-tax revenue base, even though stability remains elusive.
The recent growth in non-tax revenue had largely been driven by surplus remittances from parastatals, fees tied to citizen-facing services, particularly those delivered under e-Citizen, and investment income from entities where the government holds shares, such as Safaricom.
Since taking office, President Ruto has pushed State-owned entities to surrender idle cash held in their accounts to the exchequer to ease cash flow pressures.
Treasury Cabinet Secretary John Mbadi reinforced the directive last financial year, warning chief executives of State corporations against adjusting operating surpluses by factoring in capital expenditure such as land, machinery, and buildings without prior approval in order to reduce the 90 percent payable to the exchequer.
‘It has been noted with concern that some regulatory authorities are adjusting operating surplus by providing for capital expenditure to determine the 90 percent to be remitted to the National Exchequer,’ Mr Mbadi wrote in a circular to the chiefs of State Corporations last fiscal year.
Under the policy, agencies are required to remit up to 90 percent of their surplus funds to the Exchequer, retaining the balance as stipulated under the Public Finance Management Act.
Institutions such as the Central Bank of Kenya, Capital Markets Authority, Kenya Ports Authority, Competition Authority of Kenya, Communications Authority of Kenya, and the National Transport and Safety Authority generate billions of shillings annually from fees, licences, and fines tied to the provision of government services.
The government has also accelerated the digitisation of public services through the e-Citizen platform, which has become a key driver of non-tax revenue growth.
Tens of thousands of government services have been onboarded onto the platform, enabling citizens and businesses to access services and make payments through a single channel. The shift is aimed at improving efficiency, sealing leakages linked to corruption, and enhancing revenue collection.
But the growing reliance on such measures has drawn scrutiny, with stakeholders last year raising concerns over the rising use of Appropriations-in-Aid (AiA)-revenues collected directly by ministries and agencies-as a major funding source for the government.
Ministerial A-i-A are revenues collected by various Government Ministries, Departments, and Agencies when discharging services and spent at source after appropriation by lawmakers.
Participants warned during Treasury’s public budget hearings last year that increased reliance on fees and levies imposed by public institutions ultimately raises the cost of accessing services for businesses and ordinary citizens, potentially undermining affordability.
The National Treasury has defended the strategy, saying the growth in non-tax revenue reflects deliberate efforts to enhance the financial sustainability of public institutions, improve service delivery efficiency, and reduce reliance on exchequer funding.
‘The Government assures that the increase in fees will not compromise access to or the quality of public services. In most cases, the fees and levies remain modest and non-competitive when compared to market rates, ensuring that public services remain affordable to all Kenyans,’ the Treasury wrote in the 2025 Budget Review and Outlook Paper.