No Major Tax Hikes As Treasury Prioritizes Cost Of Living Relief

By Our Correspondent

The government has sought to ease pressure on households and businesses by avoiding significant new taxes in the 2026/27 budget, with the Treasury saying public consultations overwhelmingly called for lower living costs and reduced taxation on essential goods.

Presenting the 2026/27 Budget Statement in the National Assembly yesterday, National Treasury Cabinet Secretary John Mbadi said the spending plan was shaped by extensive engagements with Kenyans across the country and reflects a deliberate effort to balance revenue collection with economic recovery, job creation, and affordability.

The decision marks a notable departure from previous budgets that relied heavily on tax measures to boost government revenue. It also comes nearly two years after the Finance Bill 2024 sparked widespread public protests, forcing the government to rethink its approach to taxation and public participation.

Mbadi said feedback from citizens during regional consultations, town hall meetings, stakeholder forums, and digital engagements consistently pointed to the need for relief from the high cost of living.

“The main feedback from all these engagements was that the Government should reduce the overall cost of living by lowering the tax burden on essential commodities; tame wastage of public resources; and decisively deal with corruption,” Mbadi told lawmakers.

The Treasury said the budget is anchored on sustaining the Bottom-Up Economic Transformation Agenda (BETA) while promoting private sector-led growth, preserving macroeconomic stability, and creating opportunities for ordinary Kenyans.

According to Mbadi, the government intentionally chose a cautious path on taxation after listening to concerns from households, businesses, farmers, youth groups, and informal sector operators who said rising costs had strained incomes and weakened purchasing power.

“Kenyans want an economy that works for them; an economy where the cost of living is manageable; where opportunities for employment and businesses are expanding; and where the benefits of economic growth are shared widely across society,” he said.

The budget seeks to support those objectives through continued investment in agriculture, affordable housing, healthcare, infrastructure, manufacturing, digital innovation, and small business development rather than relying solely on higher taxes to finance expenditure.

Agriculture remains one of the government’s flagship sectors under the BETA framework. Treasury highlighted gains achieved through the fertilizer subsidy programme, which has reduced the price of a 50-kilogram bag of fertilizer from KSh 7,500 to KSh 2,500 while significantly increasing uptake among farmers.

The government said the intervention has helped lower production costs, improve food security, and increase agricultural output, benefiting both rural households and consumers facing food price pressures.

Mbadi said the administration would continue supporting productive sectors of the economy because growth remains the most sustainable path toward improving livelihoods.

“They want to see a Government that protects their livelihoods; supports farmers and small businesses; empowers the youth and women; and ensures that public resources are used prudently and transparently,” he said.

The budget also places significant emphasis on strengthening devolution, with county governments set to receive a record KSh 502 billion in total allocations. Treasury officials argue that increasing county funding will improve access to healthcare, water services, roads, agricultural extension services, and other critical functions delivered at the local level.

At the same time, the government has maintained its commitment to fiscal discipline. Treasury projects a gradual reduction in the fiscal deficit from 5.5 percent of GDP in the 2026/27 financial year to 3.3 percent by 2028/29 as part of a broader strategy to strengthen public finances and ensure debt sustainability.

Mbadi acknowledged that global economic conditions remain challenging, citing geopolitical tensions, supply chain disruptions, and rising energy prices as risks to growth and inflation. He noted that global oil prices rose sharply between February and May 2026, creating additional pressure on households and businesses.

Despite those challenges, the Treasury argues that Kenya’s economy has demonstrated resilience. The government reported average economic growth of five percent between 2022 and 2025, outperforming both global and regional averages during the same period.

“The hard decisions are bearing fruits,” Mbadi said. “Under the Bottom-Up Economic Transformation Agenda, we have recorded clear gains.”

The Treasury pointed to lower inflation, a more stable exchange rate, stronger foreign exchange reserves, and improved access to credit as indicators that the economy is on a firmer footing than it was three years ago.

Another key feature of the budget is its focus on employment creation. The government intends to accelerate investments in labour-intensive sectors, expand support for micro, small and medium-sized enterprises, and deepen industrialization efforts to generate jobs for Kenya’s growing youth population.

Mbadi said public participation played a central role in shaping the budget and emphasized that citizens expect their taxes to deliver tangible results.

“Above all, the people of Kenya want assurance that their hard-earned taxes will translate into tangible improvements in their daily lives,” he said.

The Treasury also signaled continued reforms within the Kenya Revenue Authority aimed at improving tax compliance, broadening the tax base, and reducing leakages through technology rather than imposing new burdens on compliant taxpayers.

While some economists have cautioned that the government still faces significant financing pressures, the absence of major new taxes is likely to be welcomed by households and businesses that have been grappling with elevated living costs and slower income growth.

For many Kenyans, the most significant message from the 2026/27 budget may not be what has been introduced, but what has been left out. After months of consultations and lessons drawn from recent public discontent, the government has opted for a budget that prioritizes affordability, economic growth, and public confidence over aggressive tax increases.

“This Budget is being presented at a time of heightened global uncertainty,” Mbadi said, adding that the government’s objective is to protect livelihoods while sustaining growth and maintaining economic stability in an increasingly unpredictable global environment.