Proposed amendments will boost economic resilience

In tandem with these business-friendly shifts, amendments in Tax and Public Finance laws are set to refine Kenya’s fiscal framework. Simplifying tax compliance and improving public finance management are longstanding recommendations from economists and business leaders alike. With a more transparent and manageable tax system, Kenya could create a tax-friendly environment that encourages compliance and sustains critical public services. Furthermore, by bolstering public finance transparency, the government can reassure citizens that their taxes are funding vital services effectively.

Another aspect that warrants attention is accountability. Amendments to public finance laws are aimed at improving oversight and transparency in public fund management, but effective implementation will be critical. Kenyans have seen previous reform efforts stall due to weak enforcement, resulting in persistent fiscal mismanagement. Civil society leaders argue that unless robust accountability mechanisms are embedded and strictly enforced, public trust will be difficult to restore.

Enhancing public finance management is not merely about drafting new laws; it’s about ensuring these laws result in concrete, positive change in the way funds are managed and used for public benefit.

Additionally, Kenya’s proposed amendments should be evaluated within a broader regional context. As neighbouring East African nations pursue similar reforms to attract foreign investment, Kenya faces a competitive landscape. Successful implementation of these changes could elevate Kenya’s standing on the Ease of Doing Business index, positioning it as a regional leader and offering a significant advantage in the race for investment.

However, if the promises of these reforms go unfulfilled, Kenya may struggle to retain its appeal as other countries present more reliable investment destinations. Effective execution is thus paramount to Kenya’s long-term competitiveness. The potential impact of these amendments on Kenya’s economy goes beyond just creating a conducive environment for business; they also lay a foundation for sustainable economic resilience.

Despite global challenges, Kenya’s economy has demonstrated notable stability, with inflation rates gradually declining and the Kenyan Shilling holding steady against major currencies. These indicators reflect effective monetary policy, creating a stable environment conducive to the projected GDP growth of 5.4 per cent this year, anticipated to rise to 5.6 per cent by 2025.

Nevertheless, maintaining this trajectory will require more than stability; it will demand a strategic overhaul of existing tax policies and administrative systems. An expanded tax base and an equitable tax regime will allow the government to mobilise revenue without stifling business.

Kenya’s Medium-Term Revenue Strategy (MTRS) provides a structured path toward balancing revenue generation with economic growth. The MTRS prioritises expanding the tax base by targeting hard-to-tax sectors, thereby alleviating pressure on existing businesses. Additionally, re-evaluating tax incentives to ensure alignment with national goals and fostering transparency around these incentives are critical to maximising their impact. A well-managed tax incentive system can ensure that resources are effectively channelled into essential services, such as healthcare, education, and infrastructure.

Kenyan citizens are increasingly vocal about the need for transparency and accountability in public spending. The National Treasury’s commitment to improving Public Finance Management (PFM) reflects this demand. By introducing an end-to-end e-Government Procurement System, the government seeks to enhance transparency and accountability in public procurement. Additional reforms in asset and inventory management will also help ensure optimal utilisation of public resources. With greater visibility into government assets, the government can maximise value for money and foster a procurement environment built on integrity and fairness.

Ultimately, Kenya’s path to an improved business climate and stronger economic governance is a collaborative endeavour that demands sustained commitment from all stakeholders—government, businesses, and citizens. The proposed legislative amendments have the potential to reshape Kenya’s economic landscape, but realising this potential will require precise implementation and unwavering accountability.

The writer is Principal Secretary of the National Treasury