Kenya’s economic transformation takes center stage: Government unveils new reforms in bold economic update

The government today delivered an optimistic outlook on the country’s economy during a press conference led by Government Spokesperson, Hon. Sen. Dr. Isaac Mwaura in Nairobi.

Dr. Mwaura detailed the progress made under the Bottom-Up Economic Transformation Agenda (BETA Plan) and introduced significant tax reforms, fiscal policies, and initiatives designed to foster sustainable growth, improve social equity, and create a fairer economic environment for all Kenyans.

Bottom-Up transformation and fiscal stability

Since launching the BETA Plan two years ago, the government has focused on job creation, income redistribution, and ensuring economic stability. Dr. Mwaura emphasized the government’s commitment to sound fiscal policies aimed at reducing the national debt while boosting domestic revenue. “Our objective is to build a robust economy that relies less on foreign borrowing and more on local revenue generation,” he stated.

With public debt now standing at 68 percent of GDP, down from 73 percent, the government is taking strategic steps to strengthen fiscal responsibility. A comprehensive package of amendments under the Tax Laws (Amendment) Bill, 2024 and the Tax Procedures (Amendment) Bill, 2024 has been introduced. These reforms, shaped through extensive public consultations, aim to improve tax compliance, curb evasion, and streamline revenue collection.

Equitable tax reforms for sustainable growth

The proposed tax reforms emphasize equity and fairness. Key changes include tax amnesty provisions where justified and a reduction in unnecessary tax expenditures, which often detract from funding critical services. The reforms are expected to enhance funding for county governments, ensuring smooth operations even when fiscal allocations are delayed.

“We aim to implement a tax system that is fair, transparent, and efficient, giving every citizen the chance to contribute their fair share to the nation’s growth,” said Dr. Mwaura.

In the digital economy, new regulations will expand the tax base to include services like ride-hailing, food delivery, and freelance platforms. A Significant Economic Presence Tax will also be introduced, ensuring that non-resident digital service providers pay fair taxes, aligning Kenya’s policies with global best practices.

Boosting employee benefits and supporting local business

The reforms also propose better benefits for Kenyan employees, including increased non-taxable allowances for meals, gratuities, and other non-cash benefits. Contributions to registered pension and retirement funds will be enhanced, allowing Kenyans to save more effectively for their futures. Additionally, contributions to the Social Health Insurance Fund and affordable housing schemes will now be deductible, increasing take-home pay for workers.

The government has further introduced amendments aimed at improving the ease of doing business. Adjustments to the Investment Promotion Act and changes to the Public Procurement and Asset Disposal Act will prioritize local manufacturers, mandating that at least 40 percent of goods and services procured by the government come from Kenyan businesses. These measures are expected to drive job creation and economic growth while protecting local industries from substandard and counterfeit products.

Agriculture sector revitalization

Agriculture remains a central pillar of the BETA Plan, with efforts aimed at boosting farmers’ profits and stabilizing the prices of essential goods like maize flour. The government, through the National Cereals and Produce Board (NCPB), has set the buying price of maize at Ksh. 3,500 per 90 kg bag, up from previous lows of Ksh. 2,500. This move aims to protect farmers’ livelihoods and provide stability in the maize market.

Local farmers have welcomed the decision. Joyce Jebet, a maize farmer, expressed her relief, stating, “The new prices give us hope and assure us of fair returns. This intervention by the government demonstrates a strong commitment to supporting us.”

The price stabilization efforts have already resulted in lower retail prices for essential goods, with maize flour now selling at Ksh. 89, sugar at Ksh. 120 per kg, and cooking oil at Ksh. 200 per liter. The improved harvest, attributed to the government’s fertilizer subsidy program, has been a key factor in these positive market shifts.

Healthcare reforms and the SHA progress

The government also highlighted the success of the Social Health Authority (SHA), which has replaced the former NHIF. Over 14 million Kenyans have registered under this restructured system, benefiting from expanded access to quality healthcare at no out-of-pocket costs. Public hospitals across the country, including major facilities in Nairobi, have reported a positive impact, especially in the treatment of chronic conditions like cancer and diabetes.

The government has called on private healthcare providers to join the SHA initiative, helping to meet the increasing demand for medical services and ensuring comprehensive care for all Kenyans.

IMF support and international confidence

In a boost to the country’s economic outlook, the International Monetary Fund (IMF) has extended a Ksh. 78 billion facility under the Extended Credit Facility (ECF) to support Kenya’s fiscal and climate resilience measures. Dr. Mwaura clarified that this extension is not a new loan but part of an ongoing program initiated in 2021 to address debt vulnerabilities and promote stability.

“This endorsement from the IMF reflects growing international confidence in Kenya’s economic direction,” noted Dr. Mwaura. He added that the facility will help stabilize the Kenyan Shilling, increase foreign exchange reserves, and enhance market confidence.

Strengthening public trust and governance

As Kenya moves forward with these comprehensive reforms, the government has pledged to use public resources efficiently and transparently. Enhanced service delivery in critical sectors like health, housing, and education will be a top priority.

“Our commitment is to build public trust and ensure that tax revenues uplift the lives of all Kenyans,” Mwaura added