On Tuesday, Kenya’s Cabinet approved the Finance Bill, 2025, and announced plans to reduce the proposed Sh4.3 trillion 2025/26 budget to enhance fiscal discipline and economic stability.
Chaired by President William Ruto at State House, Nairobi, the Cabinet endorsed measures to lower the fiscal deficit to 4.5% of GDP in 2025/26, down from 5.3% in 2023/24 and 5.1% in 2024/25, targeting 2.7% in the medium term.
Ministries, in collaboration with the National Treasury, will implement austerity measures to prioritise essential services while addressing public debt pressures.
Finance Bill 2025
The Bill focuses on improving tax efficiency by closing loopholes, streamlining refunds, and amending the Income Tax, VAT, Excise Duty, and Tax Procedures Acts.
It tackles inflated refund claims, allows small businesses immediate deductions for tools and equipment, and exempts gratuity payments from taxation for retirees.
Employers must now apply eligible PAYE tax reliefs automatically, reducing refund delays.
The Public Finance Management (Amendment) Bill, 2024, mandates county emergency funds to bolster disaster response, prompted by the 2023 El Niño rains and consultations at the Intergovernmental Budget and Economic Council in August 2024.
Judicial and Healthcare Reforms
The Judges Retirement Benefits Bill, 2025, introduces a tailored pension system for judges, combining defined benefits for current judges and defined contributions for new ones, with enhanced benefits to strengthen judicial independence.
In healthcare, two Level VI referral hospitals will be built in Bungoma and Kericho with African Development Bank support, advancing Universal Health Coverage.
Economic and Regulatory Measures
Amendments to the Capital Markets Act remove shareholder limits in regulated institutions while preserving governance, aiming to deepen financial markets.
The Draft Pest Control Products Bill, 2024, establishes a Pest Control Products Authority to enhance food safety and agricultural exports.
Diplomatic Engagement
The Cabinet approved a consulate general in Port-au-Prince, Haiti, reinforcing Kenya’s role in global peace and security, particularly in supporting Haiti’s stabilisation.
2025/26 Budget: Kenya Allocates KSh199 Billion More Than Planned
