Kenya is preparing for the official reading of the 2025/26 national budget next week. However, budget estimates submitted to Parliament indicate that the government plans to spend KSh 4.24 trillion against projected revenues of KSh 3.32 trillion, resulting in a massive deficit of KSh 876.1 billion. This shortfall is expected to be financed primarily through domestic borrowing, even as Kenya’s public debt has already soared past KSh 11.35 trillion. 

While the 2025 Finance Bill is presented as a tool to enhance tax administration and improve revenue collection, our analysis of both the Bill and the broader fiscal framework reveals a more urgent crisis of unchecked, poorly prioritized, and duplicative expenditures that risks deepening inequality and undermining service delivery. Any measures implemented may not achieve the desired economic stability without addressing the underlying inefficiencies in expenditure.

This year’s finance bill proposes various amendments to the income tax, value-added tax, excise duty, tax procedures, and miscellaneous fees and levies acts that may appear technical but have significant consequences for ordinary Kenyans. Among the most glaring proposals is the increase of the tax-exempt per diem allowance to KSh 10,000 from KSh 2,000. While this may seem like a relief for some, it effectively provides disproportionate tax shelter to senior public officials, particularly in the Executive, who already receive generous allowances from their various domestic travels. Meanwhile, workers in the informal sector, self-employed individuals, and low-income earners continue to face the brunt of taxation with minimal relief. This situation undermines the principle of progressive taxation and deepens the divide between the well-connected and the struggling majority.

Equally alarming is the proposal to delete Section 59A(1B) of the Tax Procedures Act, which currently prohibits the Kenya Revenue Authority (KRA) from accessing sensitive personal and customer data, such as bank transactions and mobile money records, without a court order. If passed, this amendment would grant the KRA unchecked surveillance powers and unfettered access to our personal information, violating the constitutional right to privacy under Article 31 and the provisions of the Data Protection Act, 2019.

Such a move is unconstitutional and tone-deaf to the lived fears of many Kenyans, especially after the 2024 protests, which were met with a crackdown primarily supported by surveillance. Additionally, there are disturbing reports that Safaricom has allegedly been facilitating the tracking and capture of suspects by Kenyan paramilitary forces that have a history of enforced disappearances and extrajudicial killings. Beyond individual privacy, the political consequences are dire. With unrestricted access to vast troves of data, there is a real risk of voter targeting, political profiling, and electoral interference.

In addition to the regressive tax changes targeting ordinary Kenyans, this year’s finance bill includes several proposals that seemingly favor elite and politically connected interests under the guise of economic growth. Among these proposals are the suggested reduced tax rates for Special Economic Zones (SEZs) and the Nairobi International Financial Centre. While these incentives are presented as necessary for attracting investment, the criteria for qualification remain unclear, raising concerns that these measures could turn into tax shelters for the well-connected and politically aligned individuals. Without full disclosure of beneficiaries or a transparent regulatory framework, such tax breaks risk deepening inequality and shielding the wealthy from the public tax net. In a country where the burden of taxation already disproportionately affects low- and middle-income citizens, these proposals represent a dangerous shift in fiscal fairness. Tax rates must be equitable and transparent, not tailored to the privileged few.

Similarly, the proposed reduction of the Export and Investment Promotion Levy (EIPL) on select steel products, from 17.5 percent to 10 percent, may seem beneficial at first glance, but it warrants closer examination. While the stated intention is to lower construction costs and bolster manufacturing, questions remain about who will genuinely benefit. The local construction sector has already experienced a slowdown, and such a policy change may primarily favor well-connected importers and players in the politically sensitive steel industry, rather than small manufacturers or the average Kenyan. A progressive tax policy should promote local value addition and not incentivize reliance on imported semi-finished goods. 

These provisions, viewed together, reveal a troubling pattern: a fiscal framework that places burdens on the many to advantage the few. As the finance bill progresses through public participation and parliamentary debate, it is essential that these inequities are highlighted and rectified.

Another deeply concerning proposal involves the removal of key zero-rated items from the VAT Schedules under Clauses 36 and 37 of the finance bill. The proposed changes would shift essential goods such as solar panels, raw materials for medicines, animal feed inputs, electric vehicles, electric bicycles, and bioethanol stoves from zero-rated to VAT-exempt status. While this may seem like a minor technical adjustment, the implications are far-reaching and severe. When goods are VAT-exempt instead of zero-rated, producers can no longer reclaim input VAT on the raw materials or processes used to produce those goods. This ultimately increases production costs and drives prices higher for consumers.

In real terms, this means that the cost of healthcare, food, clean energy, and transportation is likely to skyrocket, placing the greatest burden on low-income households. Patients who depend on medication for chronic conditions may find their treatments increasingly expensive. Farmers and livestock producers may face higher input costs for animal feed. Meanwhile, taxing climate-smart technologies like solar panels, electric vehicles, lithium-ion batteries, and clean cooking stoves directly undermines Kenya’s environmental and climate resilience goals. These are the very tools we need to transition to a green economy, and by making them more expensive, the government risks stalling innovation, discouraging adoption, and penalizing environmental responsibility.

Instead of promoting sustainability and affordability, these VAT amendments shift the burden onto consumers while limiting access to essential goods and services. The government needs to identify an alternative solution that prioritizes its citizens while addressing rogue manufacturers to lessen tax expenditure burdens. The current approach must be reassessed considering its long-term negative effects on Kenyan citizens and the broader economy.

The finance bill also proposes deleting Section 17(5)(c) of the VAT Act, which currently allows businesses to apply excess input VAT to offset other tax obligations. Removing this clause will tighten cash flow for small businesses and delay operations, especially since VAT refunds are already chronically delayed. These amendments come at a time when the cost of living is unbearable, with prices of basic goods and services spiraling beyond the reach of many families.

Critical sectors face budget cuts

Budgets should reflect a balance of efforts to protect citizens' priorities within a specific economic context, especially now that 20.1 million Kenyans continue to live below the poverty line. At the overall level, we see a persistently high allocation to the Public Administration and International Relations (PAIR) sector compared to social sectors, which are highly administrative. Of all sectors, the PAIR sector ranks third in proportion of the national budget allocated, with an 11 per cent share of the total budget in FY 2025/26. This occurs while critical sectors such as health and social protection, culture and recreation receive six and three per cent, respectively, with governance, justice, law and order, and national security tied at 10 per cent.

Focusing on education, the budget proposes a KSh 4.3 billion cut to the allocation for free primary education from its most recent approved figure, impacting essential programs within basic education, such as the school feeding program. This program, which has existed in various forms since the 1970s and aims to enhance educational enrollment, faces a proposed reduction of KSh 600 million despite an increase in the number of targeted learners from 2.6 million to 2.8 million. According to our calculations based on KIPPRA data, KSh 600 million could provide one meal a day for 50,000 children for the entire financial year, meaning these children could potentially miss out on a meal this coming financial year.

Conversely, additional subsidies for higher education are proposed through increased allocations to HELB, as well as further funding for the infrastructure development of TVETs across the country. While these proposals are welcome, we are asking what accounts for the disparity in prioritization between vulnerable primary students and university or TVET students. There must be coherence in decision-making regarding resource distribution throughout the education sector, which remains a crucial pillar of human capital development.

Despite ongoing food insecurity, the 2025/26 budget cuts the fertilizer subsidy from KSh 14B to KSh 8B, even as the number of targeted farmers is set to double. The Agriculture, Rural and Urban Development (ARUD) sector also faces a KSh 3.3B budget reduction. Meanwhile, the government is introducing seven new state departments, including one for Justice, Human Rights and Constitutional Affairs—a positive move—but many of these departments were previously programs under others, and now come with higher allocations, increasing administrative costs. This raises critical questions about Kenya’s commitment to fiscal responsibility, especially amid a growing wage bill and claims of austerity. Are we cutting vital support to farmers just to finance more bureaucracy?

Regarding the attainment of the right to health, we commend the additional KSh 6 billion allocation to the primary health care fund, even though it still falls significantly short of the required amount. Additionally, we support the KSh 5 billion boost to the emergency, chronic, and critical illness fund, as well as the increased allocation to the insurance subsidy program for orphans and vulnerable children. However, we note that the free maternity program, popularly known as Linda Mama, has not been allocated a single shilling in the 2025/26 budget. This critical program has contributed to an increase in the number of women delivering in health facilities under the care of skilled birth attendants over time. Furthermore, we observe that there is no change in the budget allocation for the national AIDS control program, despite the KSh 9.4 billion shortfall in HIV funding due to the recent United States government's stop-work order. We acknowledge that, while the government of Kenya continues to provide the majority of resources to the Ministry of Health, essential services such as malaria, tuberculosis, immunization, and HIV still rely heavily on donor funding. This extends to the critical infrastructure supporting the Ministry of Health.

On national security, we note that the National Police Service and National Police Service Commission are proposed to receive increments of nine and 38 percent, respectively. Evidently, increased allocations for police operations signal a deliberate move by the government to reinforce securitization over rights-based governance. One of the most likely scenarios is that the state is galvanizing security forces that will unleash brutality. Previously, especially during the election period, there were reports that state officials and police officers threatened activists who sought justice for police killings and other serious abuses. The intimidation included threats of arrest, warnings not to post information concerning police brutality, home and office raids, and confiscation of laptops and other equipment.

The trend observed in resource allocations and budget execution over the past few years underscores a declining commitment by the government to enhance the judicial system, oversight of law enforcement officers, and the protection of human rights. The National Gender and Equality Commission and the Kenya National Commission on Human Rights experienced budget cuts in the 2024/25 budget, while the budgets for the Judiciary and the Independent Police Oversight Authority have stagnated. It’s worth noting that the exchequer never releases all the allocated funds on time within the year, which limits full utilization/absorption by ministries, departments, and agencies.

Moving beyond the approval of this budget, citizens must remain alert to the threat of budget revisions introduced during the financial year through supplementary budgets. These in-year budgets often shift the priorities subject to public participation and approved by the National Assembly, and they increasingly signal poor budget planning. Moreover, these budget revisions often increase the size of the budget deficit, requiring more borrowing than planned and further fueling Kenya’s alarming public debt crisis. Further analysis reveals how resources are redirected through supplementary budgets, prioritizing programs that entrench state machinery. For example, the budget for the State Department for Internal Security and National Administration increased by 33 percent from KSh. 28 billion in the original 2024/25 budget to KSh. 37 billion in Supplementary II for the 2024/25 budget.

It is important to note that citizens actively participate in the budget-making process in accordance with Article 10 of the Constitution, anticipating that their voices will influence how resources should be allocated and that their input is respected during the budget implementation stage. Both revenue-raising and spending decisions must therefore reflect the demands, aspirations, and priorities of Kenyans, particularly the younger generations to whom this nation offers great promise. This is a fact the National Assembly must consider as it reviews the Budget Estimate and Finance Bill for the financial year 2025/26. This gap has created room for misplaced priorities, such as the increasing number of advisers to the president and the creation of new state departments meant to reward political loyalty. Consequently, recurrent expenditure, largely driven by the wage bill, has risen sharply by 63 per cent from KSh. 167 billion in the financial year 2021/22 to KSh. 272 billion in the financial year 2023/24 within the PAIR sector. Continued expansion of the executive contradicts the president’s promise to Gen-Z.

Supplementary budgets are being misused to undermine the voice of citizens in the budget process. In Supplementary II of the financial year 2024/25, funding for social safety nets is facing a budget cut as resources are redirected to high-level offices such as the Office of the President, Deputy President, Prime Cabinet Secretary, and State House. Compared to Supplementary II of the financial year 2025/26, the State House budget increased by 2.4 percent, rising from KSh.8.37 billion to KSh.8.57 billion. The Executive Office of the President experienced a 17.6 percent increase, going from KSh.4.54 billion to KSh.5.34 billion, while the Office of the Deputy President saw a 3.9 percent decrease from KSh.3.02 billion to KSh.2.9 billion.

This not only undermines budget credibility but also violates Sec. 43(2)(c) of the PFM Act, 2012, which prohibits variations to the original budget by more than 10 per cent. The government's failure to implement a budget shaped by public participation significantly violates the right to public participation, rendering participation meaningless, breaching the principle of accountability, and denying economic and social rights, including the right to health, education, and adequate living standards.

Notably, our analysis reveals that the government prioritizes debt servicing, which accounts for the largest expenditure item, consuming 49 percent of the total budget. For every KSh. 100 of revenue collected, over KSh. 60 goes to debt servicing, leaving very little for development and transfers to the counties. This poses a risk as it may crowd out social sector spending if the need for fiscal consolidation ends up targeting programs and social sectors essential to inclusive growth, good governance, and poverty reduction.

The Okoa Uchumi Campaign presented its official submission to Parliament, urging that the Finance Bill 2025 and the Budget FY 2025/26 be restructured to prioritize the needs of the people over the priorities of the elite. We have made it clear: Kenya cannot tax its way out of this crisis. We must first improve the spending framework. Austerity for the poor and indulgence for the powerful is neither a viable path nor a sustainable alternative. We need bold political will to cut wasteful spending, eliminate duplication of roles, and redirect funds to education, health, agriculture, and social protection.

Kenya’s fiscal future depends on more than just how much we collect in taxes—it hinges on how well the government spends what we already have. Okoa Uchumi urges Members of Parliament to reject the regressive proposals in the Finance Bill 2025 and instead advocate for a fiscal framework that is equitable, transparent, and centered on people.