President Ruto signs $14.5B budget and tax relief laws to ease Kenya’s living costs, attract investment, and cut debt burden.
Nairobi, Kenya – July 18, 2025
President William Ruto has signed three key fiscal bills into law: the Finance Bill 2025, the Appropriation Bill 2025, and the Supplementary Appropriation (No. 3) Bill 2025. These laws unlock $14.5 billion for the 2025/26 national budget, while introducing major tax reliefs to lower living costs and drive investment.
The announcement comes one year after the deadly 2024 protests over a previous finance bill. On Wednesday, citizens returned to the streets in remembrance, but this year’s demonstrations also turned violent, resulting in multiple fatalities and injuries after clashes with law enforcement.
Banks, Services Disrupted
Several businesses and institutions were affected. Co-operative Bank of Kenya, one of the country’s largest lenders, reported vandalism at two branches, minimal cash losses, and a temporary suspension of operations. The bank confirmed no staff injuries and said repairs were underway.
Key Changes in the Finance Bill 2025
The Finance Act 2025 introduces updates to six major tax statutes, including:
- Income Tax Act
- Value Added Tax (VAT) Act
- Excise Duty Act
Major Tax Reliefs:
- Automatic deductions for PAYE exemptions on employee payslips
- Pension gratuities now tax-exempt
- Capital gains tax cut from 15% to 5% for Nairobi International Financial Centre–approved investments
- VAT exemptions on:
- Small-scale distillers exempt from automation costs
The bill repeals the 3% Digital Assets Tax (DAT) from 2023 and replaces it with:
- A 5% excise tax on fees paid to crypto platforms
- A 10% service fee tax on digital platforms
- A 5% deposit tax on betting wallets
Budget Breakdown: Smaller, More Targeted
The Appropriation Bill 2025 authorizes $14.5 billion in public spending from July 1, 2025, to June 30, 2026. This is less than half of the 2024 budget (which was $30 billion), a move aligned with the government’s fiscal consolidation efforts.
- $14 billion for recurrent spending
- KSh744.5 billion (~$5.7 billion) for development projects
Key Sector Allocations:
- Education: $5.7B – funding basic education, school feeding, university scholarships
- Health: $1B – medical infrastructure, UHC rollout
- Agriculture: $368M – food security, irrigation
- Infrastructure: $2.5B – roads, rail, energy
- Digital economy & creative industries: $98M
- Industrialization: $139M – agro-processing, SEZs, MSME support
The Supplementary Appropriation Bill, tabled earlier in July, introduced a 0.5% budget cut to reflect realigned ministry needs—especially in salaries and security.
Rising Debt Still a Concern
Despite reduced expenditure, debt servicing remains Kenya’s biggest fiscal pressure point.
According to Parliament’s Debt and Privatisation Committee, nearly $13.5 billion—or 93% of the new budget—will go toward debt repayments in FY2025/26.
Breakdown of Consolidated Fund Services (CFS):
- $13.5B – public debt service
- $1.7B – pension payments
- $152M – loan guarantees and salaries for constitutional commissions
The committee has directed the Treasury to publish a debt management policy within 60 days. Lawmakers, including Vice Chair Njoki Mrembo, warn that Kenya’s $88 billion debt stock risks stalling growth unless urgent policy reforms are enacted.
“Without measurable targets and firm guardrails, we risk entering a perpetual debt loop,” Mrembo stated.
