The 2024/25 Kenya Budget, presented by Finance Minister Njuguna Ndung’u, has sparked intense debate. With a budget deficit at 3.3% of GDP and economic growth projected at 5.5%, the budget allocates funds to key sectors like education, infrastructure, and health. However, new taxation measures, including levies on bread, diapers, and motor vehicle circulation, have led to widespread youth-led protests. In addition to the new taxes, the bill proposes increasing existing taxes on financial transactions.
In a significant development, President Ruto has recently withdrawn the Finance Bill 2024 following these protests. The Kenyan government initially aimed to raise $2.7 billion in additional taxes to reduce the budget deficit and state borrowing. These measures were part of a package of economic reforms that Kenya committed to in a 2021 deal with the IMF, in exchange for additional funding. But with public debt at 68% of GDP, higher than the recommended 55% by the World Bank and IMF, Kenya is struggling to reach revenue targets. Businesses, especially manufacturers, threatened to leave Kenya due to heavy taxation outlined in the proposed bill, calling for the government to cut excess spending and tackle corruption instead.
Despite the withdrawal, the implications on the economy remain critical. The government will operate under the Finance Act 2023 while seeking alternative revenue strategies. The debate’s outcome will significantly impact Kenya’s economic stability, business environment, and public welfare.
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