NAIROBI, Kenya, Mar 6 – Treasury Cabinet Secretary John Mbadi has warned that the United States decision to freeze USAID funding will create a Sh52 billion deficit in Kenya’s 2024/2025 fiscal year, affecting key sectors such as health, education, and food security.
While appearing before the Senate on Wednesday, Mbadi acknowledged the longstanding partnership between Kenya and the US, highlighting the impact of American aid on key areas such as healthcare, economic growth, and governance.
“We enjoy a cordial and enduring partnership with the United States, which has played a crucial role in improving access to education, strengthening healthcare systems, and supporting economic growth through trade, agriculture, and infrastructure initiatives,” Mbadi said.
The CS attributed the funding cut to an executive order by the US government which imposed a 90-day pause on all foreign development assistance programs.
He noted that under the Development Cooperation Framework Agreement (DCFA) signed in 2019, USAID’s contributions to Kenya had grown from $50 million to nearly $1.7 billion (Sh220 billion), with the agreement valid until September 2028.
According to Mbadi, USAID-funded programs in Kenya include initiatives in education (Sh2.9 billion), governance (Sh1.1 billion), and food security (Sh16.5 billion).
“Education programs such as early grade literacy, teacher training, scholarships for youth in TVETs, and support for the newly established Open University of Kenya will be affected,” he said.
Mbadi highlighted that USAID funding had been instrumental in supporting over 2.5 million people, including refugees in Dadaab and Kakuma, as well as aiding counties and NGOs for improved farming practices.
“The total assistance expected from USAID in *2024/2025 was $405.4 million (Ksh 52 billion), covering health, economic growth, water, and the environment,” Mbadi stated.
The CS clarified that USAID funding does not directly reflect in the national budget since it is disbursed through implementing partners rather than the government.
“USAID contracts both international and local partners to implement programs, meaning the funds do not flow through our budget,” he said.
Mbadi however emphasized that the aid remains critical in delivering essential services to Kenyans and revealed that the government was exploring emergency funding solutions to sort the looming budget shortfall.
“We are reviewing existing budget allocations to prioritize critical services in health, education, governance, and food security. If necessary, these will be included in Supplementary Budget III to prevent disruptions,” Mbadi noted.
He also urged county governments to take proactive measures to ensure continuity in devolved services adding that the country was engaging with other development partners to secure alternative funding.
“For instance, under the Universal Health Coverage (UHC) reforms, vulnerable populations will still receive vital health services, including screenings, dialysis, kidney transplants, and essential medications to cover gaps left by USAID’s withdrawal,” he said.
The CS reassured the Senate that the government remains committed to ensuring uninterrupted service delivery, even as it navigates the challenges posed by the U.S. aid freeze.