I had the pleasure of moderating the 10th edition of the Economic Forum convened by @NCBABankKenya & the take outs were huge.

The key note was delivered by the Chairperson of the President's Council of Economic Advisors, Dr. David Ndii.

Here's what stood out for me.

A🧵 Are we still expecting a successor programme with the IMF following the premature termination of the US$3.6 billion arrangement in March this year?

I don't think so.

Here's the state of play:

· There's no consensus within government on whether Kenya needs a successor programme or not
· The government's focus as of now is on securing investment grade ratings with a view of enhancing access to the commercial market & steadily move away from multilateral financing
· It appears the points of divergence between the government & IMF are many, including the ongoing securitisation
· Dr. Ndii argues that GOK & IMF are not aligned because IMF is too much "demand side focused"
· Dr. Ndii seems to suggest that Kenya's engagement with the Fund for a programme will now be limited to something left for shock occurrences

Musings:

· When Kenya published its 2025/26 Borrowing Plan (which includes a debt-for-food swap; a Sustainability Linked Bond & UAE financing), I argued that it was a signal that talks with the IMF were as good as dead. I now believe that even more
· I am not surprised by this stance. Based on the SDR quota gobbled up by the recently terminated programme, by my math Kenya had just ~ US$400.0 million worth of space for a new programme anyway
· This, in my view, equally means that the government has slow pedalled, & possibly disengaged, from talks with the World Bank for the delayed US$750.0 million DOP
· The preemptive return to market to buyback the US$1.0 billion 7.25% 2028 Eurobond Note four weeks ago, amidst an IMF Mission to Nairobi, was a clear signal of this intent

The Auditor General's Special Report on Government Digital Payments Platform (eCitizen) is out!

Some heavy revelations here including the unearthing of diversion of funds from the mandatory 222222 Paybill for payment of government services to private accounts & the irregular collection of Convenience Fees totalling Kes 1.807 billion

A 🧵 · Equity Bank statements for eCitizen's Collection
Accounts had receipts amounting to Kes 68,719,877 & US$48,142,844 from an undisclosed account named 'pesaflow'
· This account was not listed among the approved collection accounts by The National Treasury & it was used to irregularly collect money

Folks,

I have finally gotten a hold of & read through the Vellum of Finance Bill 2025.

A quick 🧵 on what we are seeing so far, bearing in mind that the ultimate truth lies with the Act that will be gazetted. First off,

· The Bill was signed into law on June 26th alongside the Appropriations Bill
· The Bill was signed into law with 4 days left to the statutory sunset date of June 30th
· The Vellum retains the position that we shall only have 2 effective dates, July 1st, 2025 & Jan 1st, 2026
· Only 2 provisions have been deferred to take effect on Jan 1st, 2026
· The first provision taking effect on Jan 1st, 2026 is the kicking in of Advance Pricing Agreements
· The second provision taking effect on Jan 1st, 2026 is the doubling of the proportion of collections from Import Declaration Fees (from the current 10.0% to 20.0%) that is paid into a Fund established & managed in accordance with the Public Finance Management Act
· Everything else in the Bill is slated to take effect on July 1st, 2025

If you are in the Virtual Assets space, this is for you.

The National Assembly Finance & Planning Committee has tabled its report on the Virtual Assets Service Providers Bill 2025.

The Committee has made some proposals for adoption by the House.

A 🧵 Are you wondering where this Bill is coming from?

See quoted tweet from Feb 23rd, 2024

https://x.com/AmbokoJH/status/1761102362779815961

This week has been heavy from a Public Finance standpoint.

Here's where things stand as of now:

Finance Bill 2025

· Finance Bill 2025 sailed through the Committee of the Whole House
· The next thing we expect to see is the Vellum (cleaned up version following the clause-by-clause amendments) after which it heads for the President's assent
· Remember June 30th is the sunset date by which it must be signed because virtually all proposed measures, except just two, are effective July 1st
· The Bill tabled by National Treasury targeted Kes 30.0 billion worth of additional revenue in 2025/26, by the time the National Assembly Finance & Planning Committee was tabling its report with proposed amendments, this had been scaled down to Kes 24.0 billion
· Total revenue target for 2025/26 is Kes 3.321 trillion

1/4 Appropriation Bill 2025

· Appropriation Bill 2025 sailed through the Committee of the Whole House in a pretty fast fashion
· Just like Finance Bill, the next thing we expect to see is the Vellum (cleaned up version following the clause-by-clause amendments) after which it heads for the President's assent
· Again just like Finance Bill, June 30th is the sunset date by which it must be signed because the financial year 2025/26 kicks off on July 1st & there'll be spending
· Size of 2025/26 budget is Kes 4.291 trillion, deficit is projected at Kes 933.2 billion (4.85% of GDP) with GOK looking to borrow Kes 635.5 billion from the domestic market & Kes 287.7 billion from the external market

2/4

Supplementary Budget III 2024/25 is out!

What are we seeing here?

· The documents were tabled in the House on Wednesday just before the Finance Bill '25 Committee of the Whole House (see quoted tweet)
· On the whole, there's a Kes 25.03 billion increase in the size of the budget (i.e. Supp. III vs Supp. II), if you compare Supp. III vs the baseline we can see a Kes 22.44 billion increase
· If you then do the math, 2024/25 budget size now stands at Kes 4.032 trillion
· Ordinary revenue target for 2024/25 have been revised downward again, the target is now Kes 2.496 trillion, down from Kes 2.581 trillion

1/4
Who are the biggest winners in Supp. Budget III 2024/25?

The top 5:

· State House - The budget is earmarked for a 44.21% increase (+ Kes 3.698 billion).
National Treasury says this increase is necessitated by the need to cater for shortfall on operations & maintenance expenses

· State Dept. for Social Protection - The budget is earmarked for a 35.27% increase (+ Kes 12.46 billion).
National Treasury says this increase is necessitated by the need for additional funds for the Inua Jamii (Cash Transfer) Programme

· State Dept. for Mining - The budget is earmarked for a 19.65% increase (+ Kes 312.3 million)
National Treasury says this increase is necessitated by additional Appropriations in Aid & surrender of excess provision for compensation of employees.

· State Dept. for ICT & Digital Economy - The budget is earmarked for an 18.20% increase (+ Kes 2.19 billion)
National Treasury says this increase is necessitated by an increase of Capital expenditure

· State Dept. for Water & Sanitation - The budget is earmarked for an 11.58% increase (+ Kes 3.45 billion)
National Treasury says that this increase is necessitated by adjustment on Development partner-funded projects

2/4

Folks,

The Report by the National Assembly's Finance & Planning Committee on Bill No.19/2025 (Finance Bill 2025) is finally out!

A short 🧵on my key highlights. The starting point is that this Report was tabled by the Committee Chairman, @KuriaKimaniMP, on Thursday last week just before the CS National Treasury took the floor to pronounce the 2025/26 Budget Highlights.

The National Treasury Cabinet Secretary has presented the highlights of Kenya's Budget 2025/26 before the National Assembly.

Just like Finance Bill '25, I found it to be lean on scope but relatively heavy on technicality unlike what we are used to.

So what stood out for me?

A 🧵 First, there have been adjustment in the numbers at the macros level.

Musings:

· The size of the budget has been bumped up to Kes 4.291 trillion from the previous Kes 4.239 trillion
· So the size of the budget is Kes 52.0 billion larger than earlier projected
· Total revenue now pegged at Kes 3.321 trillion, marginally higher than the earlier projected Kes 3.316 trillion
· Important to observe at this point that the Budget & Appropriations Committee had recommended that the projected revenue be at Kes 3.328 trillion
· Deficit is now projected at Kes 923.2 billion (4.8% of GDP), higher than the earlier projected Kes 876.1 billion (4.5% of GDP)
· GOK will come in much stronger than earlier projected into the domestic market. It now looks to borrow Kes 635.5 billion, earlier projection was Kes 591.9 billion
· GOK will tap just a little more than earlier projected into the external market. It now looks to borrow Kes 287.7 billion, earlier projection was Kes 284.2 billion

The @WorldBankKenya has published the latest edition of Public Finance Review for Kenya & I think it makes for an important read, especially coming right in the middle of conversations on Finance Bill 2025 & Budget Estimates 2025/26.

My key take aways.

A 🧵 The Bank argues that Kenya bloated public sector wage bill is hinged largely on its allowances system.

The Bank says:

· When Kenyan civil servants from various job groups undertake an official overseas trip to the United States, the current government rates lead to an average expenditure of US$513.0/day per person
· If the per diem & accommodation rates are standardised across all job groups using rates from Ministries, Departments & Agencies, the average daily cost per officer drops to US$326.0, a saving of US$187.0/day
· Alternatively, if the rates are standardised across all job groups using the UNDP rate, the average daily cost per officer is US$460.0, a saving of US$53.0 per day

Folks,

Finance Bill 2025 is out!

The last time we saw Finance Bill close to this lean in pages was in 2021 (47 pages) & that was coming on the back of two COVID-19 induced Tax Laws legislations.

Some key highlights from my reading.

A 🧵 First thing to flag is that GOK has done away with the traditional three tiered effective dates.

· Finance Bill 2025 doesn't have any provisions slated for September 1st as the effective dates
· We have only two provisions kicked down to take effect on Jan 1st, 2026, all the remaining 57 clauses are effective July 1st, 2025

Musings

· Granted this Finance Bill is much leaner than what we've seen in the recent past but this tells us GOK is keen on its cashflows at the earliest possible
· If you want to make sense of this, the latest Cabinet Despatch & the adjustments to expenditure & the 2025/26 fiscal deficit are the guide

The Virtual Assets Service Providers Bill 2025 has been tabled in the National Assembly by Majority Leader, Kimani Ichung'wah.

Important to observe that the 2025 Bill is a lot more detailed than the Bill we saw in 2024.

A few notable things to point out.

A 🧵 First,

· The Virtual Assets Service Providers Bill 2025 is part of Kenya's efforts to get of the Financial Action Taskforce's grey list
· Among the 7 commitments Kenya made to the Financial Action Taskforce, one was to adopt a legal framework for licensing & supervision of virtual assets service providers
· See quoted tweet for details

x.com/AmbokoJH/statu…

US President, Donald Trump, has announced sweeping reciprocal tariffs including the 10.0% baseline tariff applying to economies such as Kenya.

To make sense of what this means for Kenya, we need to understand what are Donald Trump's demands regarding Kenya from a tariff reciprocation standpoint.

Here are 10 things I think we all need to know.

A 🧵 1. Kenya's demands on imported maize

· The Trump administration argues that whereas Kenya subjects imported and domestically produced maize to a total aflatoxin limit of 10 parts per billion & a 13.5% maximum moisture content, Kenya has not provided adequate scientific justification for these requirements
· The Trump administration argues that as a result of this, most US maize exports are denied import permits to Kenya
· The Trump administration further argues that US maize exports that are permitted under special circumstances, the costs associated with the additional processing requirements make them largely uncompetitive

Folks,

The National Assembly Liaison Committee has tabled its report on the 2025 Budget Policy Statement (BPS).

So what are we seeing here with regard to the 2025/26 spending plan?

A 🧵 on 4 things I think we all need to know.

FYI: If you need context on the document that was first tabled in the House, see quoted 🧵 No. 1: Changes in the 2025/26 headline figures

Some notable changes at the expenditure ceilings level for the 3 arms of government:

· The Executive's ceiling has been trimmed by Kes 114.77 billion to Kes 2.447 trillion
· Parliament's ceiling has been increased by Kes 7.0 billion to Kes 49.488 billion
· Judiciary's ceiling has been increased by kes 1.0 billion to Kes 26.749 billion
· Based on the changes to the ceilings for the 3 arms, the National Government budget ceiling be approved at Kes 2.523 trillion, down by Kes 106.77 billion compared to what was initially tabled in the House

Other details:

· Counties' Equitable Share has been left unchanged at Kes 405.069 billion
· The projected 2025/26 fiscal deficit is maintained at 4.3% of the GDP

The share of Stanbic Plc (@StanbicKE) topped the charts at the Nairobi Securities Exchange during Wednesday's trade on the back of stellar earnings which saw net earnings surge 12.8% to Kes 13.7 billion & the proposed dividend grow 35.1% y/y to Kes 20.74/share.

I sat down with the bank's Chief Finance & Value Officer, @Musaus, to dig into the numbers.

A🧵 Our conversation started on the balance sheet with me asking Musau 2 things:

· What informed the 11.59% (Kes 30.0 billion in absolute terms) y/y contraction in the loan book to Kes 230.32 billion. Barring FX adjustments, what else was at play here?
· More importantly, the loan book seems to have thinned out considerably in the latter half of 2024. What informed this?

Musau says:

· Out of the 11.59% contraction in the loan book, 8.0% is purely a function of FX adjustment. That means of the Kes 30.0 billion contraction, just about Kes 20.71 billion is FX adjustment
· Beyond the FX component, Stanbic Bank is now participating in the government-to-government sourcing of petroleum product via issuance of Letters of Credit
· That participation meant that the bank then took on short-term but very lumpy facilities which translates into sudden expansion & contraction & so there's a timing element to the size of the loan book

In the FY2024 Saccos' earnings season, the usual hype around dividends has been obscured by exposure to KUSCCO which has slumped into insolvency.

I sat down with the CEO of the regulator of primary Saccos (SASRA), Peter Njuguna, to discuss just how much havoc the KUSCCO insolvency has wreaked.

A🧵

We began from the prudential side of things:

· The total KUSCCO exposure to Sasra regulated 355 Saccos is Kes 14.6 billion
· This Kes 14.6 billion translates to just about 10.0% of the industry core capital (2023 industry data)
· Out of 355 Sasra regulated Saccos, 201 (56.62% of the total universe) are exposed to KUSCCO But to make sense of the KUSCCO & the unravelling insolvency, we need to dial back to October 2023.

Here's why:

· The then Cooperatives CS, Simon Chelugui, wrote to SASRA directing it to spect KUSCCO
· The issue at hand was that KUSCCO, a broadly unregulated entity, was conducting business that is the preserve of regulated entities (i.e, primary saccos)
· In short, the CS was asking why KUSCCO was engaging in deposit taking (the deposits that now have 201 saccos exposed) yet it is not under the ambit of SASRA
· SASRA was directed to evaluate & assess the books of KUSCCO & recommend appropriate action
· Importantly, SASRA was supposed to advise on a path to bring KUSCCO under its regulation

Massive data dump in the National Assembly this afternoon.

We have seen the Budget Policy Statement 2025, the Medium-Term Debt Management Strategy & now the Report on Loans Contracted by the Government between Sep 1st & Dec 31st, 2024.

The starting point is this - Between Sep 1st & Dec 31st, 2024 Kenya tapped into loans worth Kes 68,652,152,403.0

A 🧵on the 10 largest loans taken in this period. · The largest single loan taken is from the Government of Italy, a €150.0M (Kes 20.33 billion) facility
· The loan will be repaid in 27 equal instalments starting Dec 31st, 2032 through Dec 31st, 2045
· The interest is the EURIBOR + 1.23% annually
· There's a 0.25% commitment fee annually
· The purpose of the loan is to help Kenya realise its climate action goals & reduce greenhouse gas emissions

So what do we all need to know about the the Central Bank of Kenya's decision to slash the benchmark rate by a further 50.0bps to 10.75% & the Cash Reserve Ratio by 100.0bps to 3.25%?

Here are key take outs from the Governor's post-MPC briefing this morning.

A🧵

About the slash in the benchmark rate & the Cash Reserve Ratio & risks of failure to transmit to the real economy:

· The Central Bank has thrown out the argument that banks are still holding expensive deposits & that is why they are unable to transit the gains of the slash in rates to borrowers
· The Central Bank argues that with the benchmark down 225.0 bps since this unwinding cycle began & T-bill yields having fallen steadily, banks should not be levelling this argument of expensive deposits
· 5 banks are already being subjected to the new on-site inspection by the Central Bank to ensure that cost of funds aligns with the interest rates imposed on borrowers. This is to be completed within 2 weeks
· The Central Bank is leaning on penalties as provided in the Business Laws (Amendment) Act 2024 to impose penalties on banks which fail to extend the interest rate relief to borrowers
· Penalties will be as steep as 3x the bank's realised gain

Two days after raising the issue of the Draft 2025 Budget Policy Statement, the National Treasury finally uploads it.

First, I see an issue here. The public has until Jan 21st, 2025 to make submissions on the document.

That's just 6 days to interact with the document & make submissions.

So what's new?

A short 🧵 Summary:

· M-Akiba bonds will likely be coming back in 2025/26
· Government has fleshed its road map for implementation of the Treasury Single Account
· Government has fleshed out its roadmap for implementation of the transition from cash to accrual accounting
· Mixed signals from the government regarding Supplementary Budget II 2024/25

Day 1 of Phase 2 of public participation on the Tax Laws (Amendment) Bill 2024 & Tax Procedures (Amendment) Bill 2024 kicked off.

Some issues that stood out for me from the submissions made so far.

A quick 🧵

The highlight of my day was RSM East Africa's proposal on amendments to the VAT registration threshold (currently Kes 5.0M).

They are proposing it be bumped up as follows:

· Kes 15.0M effective Jan 1st, 2025
· Kes 20.0M effective Jan 1st, 2026
· Kes 25.0M effective Jan 1st, 2027

Musings:

· RSM raises a very compelling point. If the idea behind TOT was to simplify compliance, a relatively low low VAT threshold negates the whole objective because compliance is fairly complex
· That said, the proposed revisions to the threshold are a tough ask to say the least. The MTRS itself envisions the revision from Kes 5.0M to Kes 8.0M

Four important bills have been made public:

· Business Laws (Amendment) Bill 2024
· Tax Laws (Amendment) Bill 2024
· Tax Procedures (Amendment)(No.2) Bill 2024
· Public Finance Management (Amendment)(No.4) Bill 2024

A 🧵


Summary:

· There's an aggressive widening of the 3rd Schedule of the Miscellaneous Fees & Levies Act, slapping the Export & Investment Promotion Levy on a wide array of products
· Worth pointing out that Organic surface-active products and preparations for washing the skin will now be slapped with Export & Investment Promotion Levy at 3.0% customs value
· eTIMS reverse invoicing is being introduced for any business whose annual turnover · There's some reclassification on the VAT side from zero-rated to exempt & from exempt to standard rated
· The VAT apportionment formula of 90/10 is being repealed
· The Employment Act is being amended to widen the definition of 'employee' to capture 'working either remotely or on site'
· The 2023/24 tax amnesty programme is being extended to June 30th, 2025. However, the base period remains unchanged at Dec31st, 2022
· GOK now wants a tighter leash on withholding tax agents. Penalty at 10.0% of the amount not withheld/remitted

The Supreme Court has set aside the Court of Appeal judgement by judges Kathurima M'Inoti, Agnes Kalekye Murgo & John Mativo which nullified Finance Act 2023.

I find the Supreme Court judgement to be a pretty informative read especially with regard to the question public participation & the sticky issues around what qualified for a meaningful exercise.

A 🧵 The question of whether an amendment is material or minor/technical was very key in this judgement.

· A material amendment makes adjustments necessary to implement proposed changes in policy. They modify existing rights, impose new obligations, or impose new duties or attach a new disability
· A minor/technical amendment merely clarifies/explains the existing law
· To further distinguish the two, the Supreme Court holds that an amendment is presumed to be substantive unless it is shown that only language improvements, meant solely to enhance drafting, were intended