KDRTV NEWS – Nairobi: In a sweeping move that could redefine Kenya’s fiscal future, President William Ruto’s Cabinet has approved major budget cuts and endorsed a raft of bold economic and governance reforms aimed at consolidating public finances, supporting small businesses, and safeguarding vulnerable citizens.
Chaired by President Ruto at State House Nairobi, the Cabinet meeting directed all ministries and State departments to collaborate with the National Treasury in implementing significant budget realignments. The objective is clear: cap the fiscal deficit at no more than 4.5% of GDP in the 2025/26 financial year, down from 5.3% in 2023/24 and 5.1% in 2024/25, with a medium-term goal of reducing it to 2.7%.
As a result, the KSh4.3 trillion budget estimate will be revised downward before being tabled in Parliament. These adjustments are part of a broader austerity strategy designed to reduce public debt vulnerabilities and create room for essential public investment.
Reforms Focused on Fairness, Not More Taxes
Among the key highlights of the Cabinet resolutions is the approval of the Finance Bill, 2025, which prioritizes plugging tax loopholes and improving revenue collection efficiency — without imposing new tax burdens on ordinary Kenyans.
Key reforms in the Bill include:
Full tax exemption on all gratuity payments for retirees in both public and private pension schemes — ensuring dignity and financial security for Kenya’s senior citizens.
Mandatory application of tax reliefs by employers when calculating Pay-As-You-Earn (PAYE), sparing workers from the tedious process of seeking refunds from the Kenya Revenue Authority (KRA).
Immediate tax deductions for small businesses on tools and equipment purchases — a game-changer that will ease cash flow constraints and encourage entrepreneurship.
Amendments to the Income Tax Act, VAT Act, Excise Duty Act, and Tax Procedures Act to streamline tax refunds, seal legal gaps, and reduce prolonged tax disputes.
These reforms underpin the Bottom-Up Economic Transformation Agenda (BETA) and are expected to enhance tax justice, stimulate investment, and drive inclusive economic growth.
Mandatory Emergency Funds for Counties
In response to the vulnerabilities exposed by the devastating 2023 El Niño rains, the Cabinet approved the Public Finance Management (Amendment) Bill, 2024. The Bill makes it compulsory for all counties to establish Emergency Funds, ensuring readiness to swiftly respond to natural disasters and protect lives and infrastructure.
The decision follows recommendations made during the 24th Ordinary Session of the Intergovernmental Budget and Economic Council (IBEC) in August 2024.
Pension Overhaul for Judges to Strengthen Judiciary
The Cabinet also endorsed the Judges Retirement Benefits Bill, 2025, which establishes a specialized pension scheme tailored for superior court judges. The new framework introduces a Defined Benefit system for current judges and a Defined Contribution system for future appointees, ensuring long-term financial stability and preserving judicial independence.
Retired judges and their spouses will now enjoy monthly pensions, gratuities, medical cover, and diplomatic privileges, acknowledging their distinguished service and commitment to justice.
Universal Health Coverage Gets a Boost
In a landmark step toward achieving Universal Health Coverage (UHC), the Cabinet approved the construction of two Level VI teaching and referral hospitals in Bungoma and Kericho counties, in partnership with the African Development Bank (AfDB). These hospitals will significantly improve access to specialized healthcare in underserved regions.
Capital Market Reforms to Attract Investors
To deepen Kenya’s financial markets and boost investor confidence, the Cabinet approved amendments to the Capital Markets Act to remove shareholder limits in regulated institutions. However, robust governance safeguards remain in place, and the Cabinet Secretary retains discretion to impose limits where necessary. The reforms are expected to stimulate market growth without directly affecting government revenue.
Modern Pest Control Bill Passed
The Cabinet also passed the Draft Pest Control Products Bill, 2024, establishing the Pest Control Products Authority. The Bill modernizes pest control regulation, aligns Kenya with global standards, and promotes food safety, environmental protection, and export competitiveness in agriculture.
Kenya Expands Diplomatic Footprint in the Caribbean
In a bold diplomatic move, the Cabinet approved the establishment of a Consulate General in Port-au-Prince, Haiti. This decision underlines Kenya’s commitment to global peace and security and provides operational support for the country’s leadership role in stabilizing Haiti.
From fiscal discipline to health reforms, judicial welfare to disaster preparedness, the Cabinet’s resolutions mark a pivotal moment in Kenya’s policy direction. As these proposals head to Parliament, the nation watches closely — hopeful that this bold agenda will translate into tangible benefits for ordinary citizens.
