Kenya's debt burden to blame for painful tax measures

The passage of Kenya’s Finance Bill in June 2024 proved a potent catalyst for public discontent. What might otherwise have been a routine fiscal exercise instead became a lightning rod for broader frustrations. On June 25 last year, opposition politicians urged supporters to mark the occasion with a symbolic day of commemoration. The ensuing demonstrations descended into unrest, culminating in a tragic loss of life.

Now, as June 2026 appraches, calls for fresh protests are once again gathering momentum, centred yet again on the Finance Bill. Public debate, however, has revealed a striking degree of confusion about the legislation itself.

Many Kenyans appear to conflate the Finance Bill with the national Budget, accepting the narrative, enthusiastically advanced by sections of the political class, that it is little more than a punitive revenue grab designed to sustain governmental extravagance at the public’s expense.

In reality, both the Budget, formally the Appropriation Bill, and the Finance Bill are constitutional obligations. They are not instruments of arbitrary enrichment devised whimsically. Rather, they are legal imperatives governed by strict constitutional timelines and procedures that regulate their drafting, presentation and eventual enactment.

The distinction between the two is straightforward. The budget sets out the government’s spending priorities, allocating revenue to sectors such as healthcare, education and infrastructure. The Finance bill, by contrast, establishes the legal framework through which the State raises revenue required to fund those commitments, chiefly through taxation. Put simply, the budget determines what the government intends to spend; the Finance bill determines how it intends to pay for it.

Public unease today stems, in part, from a growing belief that the State is taxing its citizens with greater severity than in past years. That sentiment is not entirely misplaced. Kenya faces formidable economic headwinds compounded more recently by the destabilising effects of conflict in the Middle East. In such circumstances, austerity becomes less a matter of ideology than necessity. The government’s determination to widen the tax base reflects an attempt to curb excessive borrowing and restore fiscal stability.

Yet Kenya’s precarious financial position did not emerge overnight. Its roots lie in years of sustained public profligacy. A glance at the country’s fiscal history reveals the gradual deterioration of debt sustainability. Under President Moi, public debt stood at roughly Sh600 billion against annual revenues of Sh200 billion, with debt servicing consuming about 30 per cent of State income. President Mwai Kibaki increased the debt burden to Sh2 trillion, though revenues rose to Sh1 trillion, keeping debt service at a comparatively manageable 18 per cent of revenue.

The sharpest escalation came under President Uhuru Kenyatta. Public debt surged to Sh10 trillion, nearly five times annual revenue of Sh2 trillion. Consequently, debt servicing absorbed an unprecedented 72 per cent of government income, leaving little fiscal room for development or social expenditure.

It is into this inhospitable financial climate that the Kenya Kwanza administration assumed office. Although it has continued to borrow, the objective has largely been to avert default by restructuring and smoothening the country’s debt maturity profile. Debate surrounding this year’s Finance Bill should therefore proceed with sobriety rather than rancour. Criticism of tax measures, sans credible alternatives, risks inflaming public passions while offering little by way of remedy.

-The writer is a Public Policy Analyst