More burden for Kenyans as World Bank urges gov't to increase taxes

The World Bank has recommended an excise duty increment for Kenya to clear existing pending bills.

In its Africa’s Pulse reports on economic growth in Sub-Saharan Africa, the World Bank said that the proposed policy will provide economic opportunities to Kenyans and also tackle debt vulnerabilities posed by the rising pending bills.

Kenya's pending bills rose to Ksh.526 billion in June from Ksh.421.6 billion in March, threatening business closures and job losses.

The Bank therefore urged Kenya to "remove distortions" that cripple economic growth to curb adverse demand impacts.

"Clear pending bills, finance their payment with higher consumption taxes," read the report in part.

It also recommended removing tax exemptions for low consumption goods and increasing excise taxes on environmental and health externalities, among them alcohol, tobacco, and sugar-sweetened beverages.

World Bank maintained that Kenya needs to implement fiscal and governance measures to restore budget credibility and fortify public trust

"Second, deploy a combination of fiscal, governance, and structural measures to deliver productivity-driven growth, quality jobs, equity, and increased fiscal space," the statement added.

This comes as pressure mounts on the National Treasury to verify all pending bills of the national government and expedite the payment of eligible pending bills.

In the 2024–2025 financial year report, Controller of Budget (CoB) Margaret Nyakang’o said the pending bills increased by Ksh.9 billion in just 12 months.

The Ministry of Roads and Transport has the highest penalty to settle, amounting to Ksh.21.3 billion on top of its original pending bills of Ksh.121.8 billion.

The Kenya Rural Roads Authority (KeRRA), Kenya National Highways Authority (KeNHA), and Kenya Urban Roads Authority (KURA) have all accrued billions of shillings as penalties.

The Ministry of Energy has accrued penalties amounting to Ksh.1 billion through its departments - the National Oil Corporation of Kenya and the Kenya Electricity Generating Company (KenGen).

The Ministry of Health has pending bills amounting to Ksh.1.5 billion under the Kenya Medical Research Institute (KEMRI).

In May 2025, the multilateral lender wanted Kenya to introduce a carbon tax to mitigate climate change externalities while also raising revenue to lower its debt-to-GDP ratio, which currently stands at 65.5%.

The lender suggested that introducing a carbon tax on imported fuels, raising it gradually to $25 per ton of CO2 by 2030 (about Ksh.3,235) would yield additional revenues of about 0.25 percent of the GDP by this time.

Kenya has been trapped in a debt cycle with Ksh.7 out of every Ksh.10 collected going to debt repayment.

Human rights groups are calling on the government to ban supplementary budgets, scrap NG-CDF, and fully disclose all loans, amounts, and creditors, highlighting how domestic borrowing mainly benefits wealthy lenders, transferring wealth from the poor to the rich.

With Kenyan debt now standing at Ksh.11.81 trillion, domestic debt is Ksh.6.3 trillion while external debt stands at Ksh.5.48 trillion.

They argue that domestic debt is now higher than foreign debt, making it harder to track since foreign loans are under strict scrutiny by lenders, but domestic borrowing lacks such checks.