The Cabinet has endorsed a raft of austerity measures and approved the Finance Bill, 2025, marking a significant shift in Kenya’s fiscal direction. Chaired by President William Ruto at State House Nairobi, the Cabinet also approved a revision of the initial KSh4.3 trillion budget estimates to align with the country’s evolving economic priorities.
A key highlight of the Finance Bill is the government’s move to close revenue leakages and enhance tax administration. The proposed law amends several critical tax statutes including the Income Tax Act, VAT Act, Excise Duty Act, and Tax Procedures Act aiming to streamline tax refunds, reduce disputes, and ensure efficient revenue collection. The Bill notably avoids introducing major new taxes, instead focusing on improving existing systems.
Small businesses stand to gain from provisions allowing them to deduct the full cost of tools and equipment in the year of purchase. Retirees are also set to benefit, with all gratuity payments across public and private schemes becoming fully tax-exempt. Furthermore, employers will now be required to automatically apply all eligible tax reliefs when calculating Pay As You Earn (PAYE), a move expected to ease tax burdens on employees and reduce refund claims.
The Cabinet also approved the Public Finance Management (Amendment) Bill, 2024, which mandates all counties to establish emergency funds. This measure, driven by lessons from the devastating 2023 El Niño rains, aims to enhance disaster preparedness and financial resilience at the county level.
Further decisions included endorsing a new pension framework for judges, approving the construction of two Level VI referral hospitals in Bungoma and Kericho with support from the African Development Bank, and amending the Capital Markets Act to eliminate shareholder limits in regulated entities, thereby deepening financial markets.
Additionally, the Cabinet approved the Draft Pest Control Products Bill, 2024 to modernize regulation in the sector, and endorsed the establishment of a Consulate General in Port-au-Prince, Haiti, reinforcing Kenya’s leadership role in international peace efforts.
These comprehensive reforms signal the government’s intent to enhance service delivery, strengthen economic foundations, and uphold fiscal responsibility.
