The government has finally moved to lance the boil of pending bills that has been poisoning the private sector. The National Treasury has announced plans to ring-fence a massive KES 150 billion in the 2026/2027 budget specifically to clear the backlog of Value Added Tax (VAT) refunds, a move that could breathe life back into Kenya’s suffocating agricultural and manufacturing sectors.

For years, businesses have been lending the government money interest-free in the form of delayed refunds. Farmers, particularly in the horticulture and tea sectors, are owed over KES 12 billion. This liquidity crunch has forced many to scale down operations or take expensive bank loans just to stay afloat. Treasury PS Dr. Chris Kiptoo’s announcement is the first concrete sign that the state acknowledges this as a crisis of production, not just accounting.

Why This Matters to the Common Mwananchi

It might sound like high finance, but this issue hits the mwananchi at the supermarket till. When a milk processor or a flour miller has millions tied up at the Treasury, their cost of doing business goes up. That cost is passed on to you in the price of unga and milk. By releasing these funds, the government is essentially injecting working capital back into the economy, which should—in theory—stabilize prices and protect jobs.

"We cannot tax our way to prosperity while strangling the goose that lays the golden egg," remarked a Kenya Association of Manufacturers (KAM) representative. The decision to prioritize these refunds signals a shift in policy from aggressive tax collection to business facilitation.

• The Finance Bill 2026 Connection: This move is tied to the upcoming Finance Bill, which seeks to rationalize the zero-rating of products. By fixing the refund mechanism, the Treasury hopes to make the tax regime more palatable to investors who have been shunning Kenya for more predictable jurisdictions like Rwanda.
• The Trust Deficit: The promise is good, but the private sector is wary. Previous promises to clear "pending bills" have often evaporated when the budget realities bite. The proof will be in the disbursement.

A Lifeline for Farmers

For the farmer in Naivasha waiting for his VAT refund on greenhouse equipment, this news is late but welcome. It means he can repair his irrigation lines and pay his pickers without waiting for a bank overdraft. Agriculture remains the backbone of our economy, contributing 33% to GDP. Starving it of cash was a strategic blunder the government is now rushing to correct.

If executed, this KES 150 billion injection could be the stimulus package the economy desperately needs, without borrowing a single dollar from the IMF.