MPs Approve Ksh10 Fuel Levy Increase as Ruto Extends Debt Ceiling

𝐖𝐞𝐥𝐜𝐨𝐦𝐞 𝐭𝐨 𝐓𝐨𝐝𝐚𝐲’𝐬 𝐌𝐨𝐧𝐞𝐲 𝐍𝐞𝐰𝐬 𝐑𝐨𝐮𝐧𝐝 𝐔𝐩: 𝐅𝐫𝐢𝐝𝐚𝐲, 𝐍𝐨𝐯𝐞𝐦𝐛𝐞𝐫 𝟖, 𝟐𝟎𝟐𝟒

The National Assembly’s Committee on Delegated Legislation has approved a Ksh 10 increase in the road maintenance levy, raising it to Ksh28 per liter for petrol and diesel. According to Capital Business, this decision aims to support the growing need for road maintenance as Kenya's road network expands. However, it has sparked concerns among MPs about the potential impact on the cost of living, with some fearing that this hike will lead to higher fuel prices and further economic strain for consumers​.

Kenya's private sector wages have dropped to Ksh75,781 per month - the first decline in over 30 years - according to a report by the Business Daily. This reflects the challenging economic environment, with businesses cutting costs due to inflation and slow sales. The reduction in pay follows a period of wage increases that failed to outpace inflation. Additionally, the introduction of new taxes, including the housing and social health insurance levies, have reduced employees’ net incomes. These changes, along with rising business costs, have led to job cuts and hiring freezes across sectors​.

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President William Ruto’s government is seeking an extension of the debt ceiling grace period, which currently limits borrowing to 55% of Kenya’s GDP. According to the Nation, the National  Treasury has proposed delaying the implementation of this debt ceiling until at least 2032, offering more flexibility to borrow beyond the set threshold. This move aims to secure concessional funding while managing Kenya's growing public debt, which exceeds the current threshold. The proposal, part of the Public Finance Management (Amendment) Bill 2024, seeks to amend the 2023 law on borrowing limits

The Tax Laws (Amendment) Bill 2024, presented by Treasury CS John Mbadi, introduces several measures aimed at easing the cost of living for Kenyans. According to The Standard, The Bill proposes to replace the Digital Service Tax with a 6% Significant Economic Presence Tax targeting non-residents earning from digital marketplaces, aligning Kenya’s tax approach with global standards. The expanded definition of digital marketplaces will now include ride-hailing, food delivery, and freelance services. The Bill also seeks to allow tax deductions for contributions to the Social Health Insurance Fund, affordable housing, and post-retirement medical funds, boosting take-home pay. Pension withdrawals due to ill health or after 20 years will be exempted from income tax, and non-residents working on fully grant-funded projects will be tax-exempt. Additionally, it raises tax-free benefits for meals, non-cash allowances, and gratuity, providing relief that has been long overdue.

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The Kenya Revenue Authority (KRA) is facing system failures that have delayed tea exports valued at Ksh29 billion, as reported by the Standard. The disruption, linked to technical challenges within KRA's IT system, has caused congestion at the port of Mombasa and slowed down the clearance of goods. This failure affects key export processes for the tea industry, which rely heavily on timely shipments to international markets. The system issues come amid Kenya's ongoing efforts to improve trade logistics and boost its tea exports, which have already seen a growth in value, despite macroeconomic challenges such as instability in key markets such as Pakistan and Egypt.