PKF Position On State of the Economy



Kenya Budget Review 2024/2025
'Sustaining bottom-up economic transformation agenda for economic recovery and improved livelihoods.' 

Background information on exchange rates
In the year 2023, the Kenyan Shilling depreciated against major international currencies including the Japanese Yen, Swiss Franc, Sterling Pound, US Dollar, UAE Dirham and Deutsche Mark. Likewise, the Kenyan Shilling improved against the Egyptian Pound, Pakistan Rupee and Congolese Franc. In the year 2024 the Kenyan Shilling has appreciated against major global currencies. The currency strengthened due to renewed confidence in the financial markets as a result of refinancing of the Euro bond. 

Kenya's economic performance is very slow compared to other East African neighbors considering it's a bigger economy. Overtaxing individuals and manufacturers leads to less disposable income hence less spending. For manufacturers it leads to either shutting down or downsizing. A profession like accounting has been highly affected. Out of every ten accountants, around five want to leave the country. Hospitality and tourism may seem to be booming in Kenya but from a global perspective they are not. Spain receives around 100m tourists annually, USA around 100m tourists annually, South Africa receives around 10m tourists annually, then Kenya receives around 2m tourists annually. There are approximately 1.5b tourists traveling worldwide annually so we still have a long way to go. 

Thematic Tax Proposals
National Tax Policy was published by the treasury and it needs to be implemented immediately. 
It provides predictability and transparency on tax policies. 
Foreign investors are then able to make long term planning decisions. They are also cushioned, leading to Kenya becoming an attractive investment destination. 

There are proposals that have a negative effect on the cost of living:
Motor vehicle circulation tax of 2.5% based on motor vehicle valuation. The impact is that cost of transport will go up and the cost of goods will also go up. 
VAT on ordinary bread. 
Repel of zero rated status of agricultural pest control products and their respective inputs and raw materials. 
Introduction of excise duty of 25% on vegetabl oils. Cooking oil is not a luxury so this will hit common mwananchi very hard. It will end up becoming a luxury yet it doesn't have a substitute. 
Increase of import declaration fee. Basic imported commodities will go up in pricing, leading to increase in the cost of living. 
Introduction of VAT in certain financial services such as foreign exchange transactions and issuance of debit/credit cards. It will discourage people from formal means of financial transfers. Tax on money transfer services to go up from 15% to 20%. 

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