Kenya Cabinet Approves Revised 2025 Finance Bill, Lowers Deficit Target to 4.5% GDP
Kenya's Cabinet has approved a revised FY2025/26 Finance Bill, dropping numerous proposed tax hikes and reducing the fiscal deficit target to 4.5% of GDP from 5.1%. The bill prioritizes closing loopholes and broadening the tax base over new levies, aiming to stabilize debt with an expected IMF deal.
In a significant fiscal policy shift, Kenya’s Cabinet has given its approval to an updated Finance Bill for the fiscal year 2025/26. This revised bill notably reverses several contentious proposed tax hikes and introduces a more conservative fiscal deficit target, now set at 4.5% of the Gross Domestic Product (GDP), down from the previously projected 5.1%. This move signals the government's responsiveness to public sentiment and economic realities.
The streamlined legislation deliberately focuses on strategic measures such as closing existing tax loopholes and broadening the overall tax base through improved compliance, rather than imposing new levies on the populace. This approach is widely seen as a significant concession following last year’s widespread public unrest triggered by concerns over higher taxes and the rising cost of living. Government analysts are optimistic that this renewed emphasis on austerity, coupled with an anticipated favorable deal with the International Monetary Fund (IMF), will play a crucial role in stabilizing Kenya's national debt and fostering a more sustainable economic environment. The successful implementation of this bill is key to reassuring investors and maintaining fiscal discipline.