NAIROBI — The Kenyan government’s bold reform agenda is set to drive sustainable growth and improve the nation’s fiscal position. With the 2024/25 budget climbing to a historic 4.2 trillion shillings ($31.1 billion), the new measures aim to reduce the fiscal deficit from 5.7% to 3.3% of GDP, stimulating economic recovery and improving public services.
The Finance Bill 2024 introduces a new tax framework designed to enhance compliance and widen the tax base. A key highlight is the 30% Significant Economic Presence (SEP) tax, which replaces the 1.5% Digital Service Tax, targeting foreign companies profiting from Kenya’s digital economy. In addition, the bill proposes taxing digital platforms like ride-hailing services, freelance marketplaces, and e-commerce platforms, encouraging innovation while bolstering government revenues.
The largest slice of the budget—656 billion shillings ($5.1 billion)—is allocated to education, reaffirming the government’s commitment to human capital development. Energy, infrastructure, and ICT sectors will receive 505.6 billion shillings ($3.7 billion), essential investments aimed at boosting Kenya’s regional competitiveness and modernizing public infrastructure.
Meanwhile, agriculture, a key driver of Kenya’s economy, will benefit from 87.8 billion shillings ($656 million). Subsidies on fertilizers and support for small-scale farmers are expected to fuel rural development and ensure food security, countering the effects of fluctuating global markets.
Although healthcare funding decreased slightly to 147.6 billion shillings ($981 million), the focus is shifting towards operational efficiency and less reliance on foreign aid. This streamlined approach seeks to improve service delivery and expand access to essential healthcare services.
On the fiscal front, Kenya aims to generate 3.44 trillion shillings in revenue for 2024 through enhanced tax measures and compliance strategies. These efforts are crucial to managing the country’s debt burden, currently standing at over 11 trillion shillings. Analysts project a 7.9% growth in tax revenues, although the Parliamentary Budget Office cautions that further fiscal adjustments may be needed to meet the ambitious targets.
Despite public discontent over some tax changes—such as the reintroduction of VAT on bread and higher vehicle taxes—the government defends these measures as essential for long-term economic stability. “This budget prioritizes inclusive growth while addressing fiscal imbalances,” Treasury Secretary Prof. Njuguna Ndung’u stated during the budget presentation.
The reforms align with President William Ruto’s Bottom-Up Economic Transformation Agenda, focusing on job creation, rural development, and public service delivery. With sectors like tourism showing signs of recovery and agriculture reporting 7% growth in 2023, experts believe these reforms will pave the way for sustained progress and greater economic resilience.
Kenya’s reform-driven growth strategy is expected to position the nation as a leading regional economy, attracting more investments while fostering innovation and ensuring sustainable public service delivery.
